Employee trust puts its weight behind Valentia's bid for Eircom

Valentia Telecommunications' €2.99 billion (£2

Valentia Telecommunications' €2.99 billion (£2.35 billion) bid for Eircom has won the backing of the Eircom Employee Share Ownership Trust (ESOT). It voted overwhelmingly to accept the offer from Valentia, chaired by Sir Anthony O'Reilly, while rejecting a slightly lower offer from Mr Denis O'Brien's eIsland consortium.

Just over 7,300 of the 13,200 members of the ESOT - which controls a key 14.9 per cent stake in Eircom - responded to the postal ballot. Some 6,478, representing 92 per cent of valid replies, voted to accept the Valentia offer and 550 voted against it.

The rival offer from eIsland was rejected by 6,043 members, which is the equivalent of 95 per cent of those who responded, and accepted by 310, or 5 per cent.

In a statement, Sir Anthony said that the result was an "endorsement of the quality of the Valentia offer". He called on other shareholders to support the offer, the details of which will be sent out by the end of the month.

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Valentia must first clear one more hurdle before making its formal offer. In order to join the Valentia consortium, the ESOT has to make changes to its constitution and trust deed. The trustees are currently awaiting confirmation from the Revenue Commissioners that the changes will not affect the tax status of the ESOT which is able to distribute its assets tax-free to members.

The consortium must launch its bid by next Monday or else it runs the risk of losing the support of Comsource, the largest shareholder.

The backing of both Comsource - which controls 35 per cent of the company - and the ESOT is needed to ensure a bidder of success.

Comsource has agreed to accept the Valentia offer of €1.365 per share, but if the bid is not formally tabled by Monday then the Dutch-Swedish joint venture is free to accept eIsland's offer of €1.365.

KPN, the Dutch phone company which owns 60 per cent of Comsource, is keen to see the takeover process brought to a speedy conclusion as it wants to use its share of the proceeds to pay down its debts. Telia of Sweden, which owns the other 40 per cent of Comsource, is not under the same constraint.

The eIsland offer formally expires on Monday, but could be extended with the agreement of the Irish Takeover Panel. The offer would almost certainly be extended in the unlikely event that the Valentia offer has not been formally launched and Comsource swops sides.

Mr O'Brien may seek to leave the offer on the table even if the Valentia offer does go ahead, just in case it comes unstuck later for some other, unforeseen reason.

Commenting on the results of the ballot, a spokesman for eIsland said: "The employees and pensioners of Eircom will realise in two years' time that they have made a mistake when they discover the full term of the Valentia deal."

The closing date for the Valentia offer will be 21 days after the document is issued, but it can also be extended. Once the formal offer is under way the consortium can begin the process of seeking regulatory approval.

The European Commission has indicated that it considers the takeover a matter for the Irish authorities which, in this case, are the Tβnaiste, Ms Harney, and the Department of Enterprise, Trade and Employment.

The Tβnaiste has the option of referring the bid to the Competition Authority but no difficulties are envisaged, despite possible conflicts of interest arising from Sir Anthony's involvement in Independent News & Media. The newspaper group, which is controlled by Sir Anthony, has a 50 per cent stake in Chorus, the cable television and telecommunications group. Independent also controls Unison, the internet portal.

John McManus

John McManus

John McManus is a columnist and Duty Editor with The Irish Times