Eircom moved closer last night to being taken over by an Australian investment group that wants to pay €2.36 billion for the company.
Babcock & Brown Capital, an investment fund, told Eircom it would buy the company in conjunction with about 12,000 of Eircom's current and former employees.
The staff will not have to put up any cash to fund the bid but they will need to commit their 21.5 per cent stake in Eircom, worth about €507 million, to backing it.
Under a complicated structure, the staff will emerge with a batch of guaranteed preference shares in the company after the takeover. They will be worth about the same amount as the current stake, but the Employee Share Ownership Trust (Esot) members will be able to draw them down at intervals to avoid onerous tax bills.
Eircom confirmed in a statement yesterday evening that it had received a "joint proposal" from Babcock & Brown and the worker-controlled Esot that "may or may not lead to an offer being made". The timing of the announcement came as a surprise because stock markets were closed yesterday.
The proposal would see the two parties paying €2.20 per share for Eircom, along with a dividend of 5.2 cent that had already been expected by shareholders.
Under the structure of the proposal, shareholders could opt to receive a special kind of preference share instead of cash. This clause represents an accommodation for the Esot, whose members would face a hefty tax bill if they had to sell for cash all at once.
Instead of this, they will be able to remain as shareholders and take out cash over time by redeeming the preference shares.
Babcock & Brown has claimed it is not looking for a quick "flip" on its investment in Eircom, similar to the return achieved when a consortium led by Sir Anthony O'Reilly bought the company in 2001 and then returned it to the stock market three years later.
Babcock & Brown has pledged instead to invest in the company for the longer term. Under existing plans at Eircom, this would see €1 billion being pumped into infrastructure in each of the coming five years.
Last month, the Australian fund's executive director, Rob Topfer, told The Irish Times he was not in search of "tomorrow's dollar".
"We're here for dollars for the next 100 years," he said, promising that a takeover would be good for the formerly State-owned company and for the wider Irish telecoms market.
Babcock & Brown was formed in 1977 and operates from 19 offices around the world. The firm has proven to have a particular strength in infrastructural investments.
The takeover proposal for Eircom has a high chance of success, since Babcock & Brown and the Esot already control 50.3 per cent of Eircom between them.
The next step is for the two parties to take a close look at Eircom's books so they can satisfy their bankers and formalise their offer.
It is likely that the Eircom board would recommend a bid at this level to shareholders, even though it is at least 20 cent below the €2.40-plus another suitor, Swisscom, was set to pay last year. That deal collapsed after the Swiss government blocked it.
One complicating factor for Babcock & Brown at this stage is the stance of the Communications Workers Union (CWU), which represents 6,000 of Eircom's 8,000 employees. The union said yesterday it was "disturbed" by reports of an imminent bid.
"We are angered by the actions of Babcock & Brown since the beginning of this process," said Steve Fitzpatrick, general secretary of the CWU. Mr Fitzpatrick said the Australians had failed to engage with any of the unions representing workers. He said the CWU had not heard from Babcock since March 23rd when the fund promised to set up a meeting.
"We have since heard absolutely nothing from the company and we are totally appalled by this disingenuous behaviour," said Mr Fitzpatrick. He said the CWU would deem any takeover "hostile" unless the Australian fund got in touch.
The CWU has a representative on the Esot, but the two groupings have differing mandates.
