ANALYSIS:LIT's intentions for Eircom, whose debts exceed €4 billion, are unclear at this stage, writes Arthur Beesley

THE PROSPECT of a fifth change of ownership of Eircom in less than 10 years emerged last night in the form of a non-binding indicative proposal for the acquisition of its owner Babcock Brown Capital (BCM) from LIT plc, a little-known activist investor listed on the small-cap Alternative Investment Market in London.

The likelihood of a formal bid from LIT is difficult to gauge at this point, as is the price level at which it might try to buy out BCM. Equally unclear are its intentions for Eircom, whose debts exceed €4 billion and whose network has suffered from years of under-investment.

However, LIT's public expression of interest in acquiring the troubled investment fund serves to bring Eircom into play once again. Even if LIT does not proceed with a bid, its intervention will hasten a change of ownership that has appeared more and more likely in recent months as BCM struggled to regain investor and bond-holder confidence.

Merger and acquisition markets around the globe are at a halt as a result of the credit crunch. But not in the case of Eircom, whose controversial flotation nine years led to a spate of deal-making that saw the company fall into the arms of Australian investment bank Babcock Brown little more than two years ago.

Babcock made much of its long-term plans for Eircom, a firm whose years in private ownership have curtailed investment in its network and hugely increased its indebtedness.

Such plans are fast fading into obscurity following a share price collapse at Babcock in light of acute doubt over its business strategy, which was dependent on the ready availability of interbank funding on the international money markets.

Babcock's meltdown prompted the departure last summer of the executives behind its strategy of buying "infrastructure" assets and hiving them off to satellite funds such as BCM, which maintains a separate listing on the Australian stock market.

In line with Babcock's demise, BCM's stock is down more than 67 per cent in the past year. BCM owns a majority stake in Eircom alongside the Eircom employee share ownership trust (Esot), which owns 35 per cent of the firm. BCM's only other asset is Golden Pages Israel, a phone directory company.

Having moved earlier this year to abandon plans for new investments and having suspended a massive share buyback programme, BCM has been negotiating terms for the cessation of the agreement under which its investments are managed by Babcock. The fund has set Friday week as the deadline for conclusion of such talks.

In addition, BCM disclosed yesterday that it was coming under pressure from certain Golden Pages Israel investors to redeem of its bonds early.

Such issues have now been overtaken by the intervention from LIT, a holding company for investments in quoted and unquoted companies which owns 6.7 per cent of BCM alongside its ultimate parent Laxey Partners. Laxey, which manages a number investment, is described as a "highly aggressive" activist investor by sources familiar with its business.

Eircom may well be dominated in the coming weeks by a takeover battle. It seems highly unlikely that yet another spell in the ownership of an investment fund will restore the business to the stability that is a pre-requisite for long-term investment in its network, which remains the basic telecoms infrastructure in most parts of the State.

The firm's flotation haunted Bertie Ahern for years. Brian Cowen is in for more of the same.