Babcock & Brown in £1.5bn bid for Eircom

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The Independent Online

"The Board of Eircom confirms it has received a preliminary approach from Babcock & Brown Capital, which may or may not lead to an offer being made for the company," it said in a statement to the Stock Exchange. In response, Eircom shares rose €0.04 to €2.20, valuing it at €2.3bn (£1.5bn), but closed well below the €2.35 level the stock hit after the statement.

In October, Babcock & Brown bought a 12.5 per cent shareholding in Eircom and described it as a long-term investment. Yesterday, the Australian investment firm said it had raised its stake to 15 per cent. Analysts believe Babcock & Brown had waited for Eircom to post its third-quarter results - which disappointed some analysts - before making its approach. Last Thursday, Eircom, which is chaired by Sir Anthony O'Reilly, the chief executive of Independent News & Media, publisher ofThe Independent, reported an unexpected fall in core earnings as competition bit, but it did point to growth at its new Meteor mobile unit.

Takeover speculation has surrounded the Irish group ever since Swisscom walked away from a bid for the company in November after the Swiss government, which controls 66 per cent of the company, blocked it from doing a deal. It had been reported that the Swiss carrier was willing to pay between €2.40 and €2.50 for Eircom.

Eircom has certainly seen its fair share of merger and acquisition activity. The Irish government floated the company in 1999. Then a consortium led by Sir Anthony, and including Soros Fund Management and Providence Equity Partners, took the company private in 2002 which took advantage of the lowly valuations the sector experienced in the wake of the crash. The group was refloated in 2004, at which point the consortium sold the bulk of its stake.

A trust holding shares for employees of Eircom is the company's biggest shareholder. It controls 20.9 per cent of the company and will now play a major role in deciding its future.