Eircom shares gain 7.5% following sale of Eircell

Eircom shares gained 7.5 per cent on their first day of trading following the sale of Eircell. The slimmed down telecoms company made its debut at €1.06 yesterday morning but moved up steadily during the day to close at €1.14 in light trading.

The shares are now within a few cents of the €1.20 level at which eIsland - the consortium led by Mr Denis O'Brien - pitched their last indicative offer for the non-mobile assets of Eircom. The two other potential bidders, the Valentia Consortium and IIU, have yet to make indicative offers but would be expected to top eIsland.

All three groupings are due to meet Eircom management this week as part of a process put in place by Merrill Lynch and Goodbody Corporate Finance last week. The groups have already completed all or most of their due diligence examination of information provided by the company. The purpose of the meetings is to allow them to discuss issues with the management with a view to formulating a proposal by the end of the month.

The potential bidders will also continue talks with the Employee Share Ownership Trust, which owns 15 per cent of the company and has indicated its support will be conditional on being allowed to increase its stake.

Once it has looked at the proposals, the board of Eircom will decide whether to enter further negotiations with any of the bidders with a view to an agreed takeover. Any of the parties has the option of launching a hostile bid without the support of the board.

Vodafone said yesterday that as of 3 p.m. on Sunday it had received acceptances from the owners of shares representing 79.6 per cent of the equity of Eircell. The offer has been extended until Sunday, May 27th, after which Vodafone will move to compulsorily acquire the remaining shares.

Eircom shareholders will start to receive Vodafone shares in exchange for their Eircell shares in the coming weeks. Under the terms of the offer they are to get just under one Vodafone share for every two Eircell shares which have been demerged on a share-for-share basis from Eircom to facilitate the transaction.

Vodafone shares fell by 13p sterling yesterday to £1.90 sterling. The fall was due in part to the effect of the issuing of 1 billion new shares to complete the Eircell deal which was worth €1.46 per old Eircom shares based on last night's price and euro-sterling exchange rate. Together with the Eircom closing price of €1.14 this comes to €2.60.

The British group announced yesterday the members of the new board of Eircell. Three Vodafone executives will join the board, Mr Ian Maxwell, Mr Peter Bamford and Mr Phil Williams. There will also be four current Eircell executives on the board including Mr Stephen Brewer, the chief executive. The other three are Mr Niall O'Sullivan, the finance director, Mr Gerry Fahy, the director of strategy and planning, and Mr Dermot Griffin, the director of business development.