Eircom shares rose seven cents to €3.30 yesterday on the back of unconfirmed reports that Dr Tony O'Reilly and his associates are looking over the company's non-mobile businesses.
Industry sources said yesterday that Dr O'Reilly's target may ultimately be Eircom's Internet and multimedia operations. The Independent News & Media chairman has declined to comment on the reports and a source close to Dr O'Reilly said it would be some time before his intentions became clear. Eircom is in the final stages of negotiating the sale of its mobile business to Vodafone for €5.1 billion (£4 billion). The deal is expected to take another two weeks to complete and will be announced along with the company's interim results. The other parts of Eircom - the fixed line and multimedia business - are expected to be sold once the Eircell deal is done.
The only other bid on the table is the €2.25 billion offer from Mr Denis O'Brien for the fixed line business. Preliminary discussions have taken place between Merrill Lynch, which is advising Eircom, and DLJ, advisers to Mr O'Brien. Although Dr O'Reilly is reported to be interested in both the fixed line business and the multimedia business, sources close to the businessman speculated yesterday that his end game may be the acquisition of the multimedia business by Independent News & Media. These include Eircom.net and Indigo, which have 60 per cent of the market for Internet access in Ireland. Eircom also has stakes in a number of e-business companies including Ebeon.
The Golden Pages directory business would also be attractive to Independent. "There is a bit of a game going on," said a source. The deal might involve Independent disposing of its cable television interests. The Internet and multimedia business are valued at between €800 million (£630 million) and €1 billion and would represent a sizeable acquisition for Independent, which has a market capitalisation of just more than €2 billion.
Independent Newspapers owns 50 per cent of Chorus, the recently rebranded cable company. The other 50 per cent is owned by Liberty International, the US cable group.
The board of Chorus recently turned down a €500 million plus offer from Telewest, the UK cable operator and is not talking to any other potential buyer at the moment. Sources close to the cable company said they expected that Chorus could become a pawn in the game being played out between Eircom and Mr O'Brien, and Dr O'Reilly.
One scenario being painted yesterday was Independent acquiring the multimedia assets of Eircom and selling Chorus to Mr O'Brien or another purchaser of the fixed line business. There would be regulatory obstacles to the ownership of Eircom's fixed line business and a large cable company, but industry sources said last night they could be surmounted. Eircom itself was forced to dispose of its cable company - Cablelink - because of its dominant position in the fixed line market. The Eircom Employee Share Ownership Plan (ESOP) Trustee, which owns 15 per cent of the company on behalf of present and former staff members, said yesterday that it has appointed Schroder Salomon Smith Barney (SSSB) to advise it.
The US bank replaces Davy Corporate Finance, which resigned in order to be free to advise Mr O'Brien on his bid. Davy is also adviser to Independent Newspapers. SSSB is part of Citigroup, the US financial services group that funded the acquisition of 10 per cent of Eircom by the ESOP when the company was floated last year.
