Stakes rise in the battle for Eircom

The battle for Eircom, the Irish telecoms operator, took a further twist yesterday when Eircom recommended an improved 3bn euros (£2bn) offer from Denis O'Brien's e-Island consortium.

The offer is pitched at 1.36 euros a share. This trumps the rival 1.27 euros per share offer from the Valentia consortium led by Sir Anthony O'Reilly, chairman of Independent News and Media, whose bid had been backed by the Eircom board.

Valentia now has 14 days from the posting of e-Island's offer to decide whether to match the bid. Only then would the irrevocable acceptances undertaken by the Comsource group, which holds 35 per cent of Eircom equity, lapse.

But the unions, which have a 14.9 per cent holding in Eircom, appeared to be backing the Valentia group yesterday. Con Scanlon, chairman of e-Island's employee share ownership trust, said: "I've seen nothing yet that says this (e-Island's offer) is better for our beneficiaries." Unions have shown concern regarding the level of debt in the e-Island offer.

A successful bidder needs the support of 80 per cent of Eircom's equity, which means the unions potentially have the power to make or break a deal.

The Comsource group consists of KPN, the Dutch telecoms group, and Telia of Sweden. KPN said it was "not unhappy" with e-Island's improved offer, but would study the details. Sweden's Telia declined to comment.

A statement from Valentia said: "Valentia is assessing the announcement (from e-Island) ... and in the meantime encourages Eircom shareholders to take no action."