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Eircom is to sell its mobile phone subsidiary, Eircell, to British telecoms company Vodafone for EUR5.1 billion, according to Friday's Irish Independent.
Agreement has been reached in principle between the two telcos, reports Business Editor Richard Curran, and a formal offer has been made. Legal paperwork is now being completed.
Under the terms of the proposed deal, Eircom shareholders will get shares worth EUR2.31 in Vodafone for each Eircom share they hold. They will retain their Eircom stakeholding, but the value of these shares will drop to EUR0.92 each, based on Thursday's price.
The sale would be the biggest takeover in Irish corporate history and significantly strengthens entrepreneur Denis O'Brien's hand in his audacious bid to take over Eircom's fixed line business.
O'Brien, who sold Esat Telecom to British Telecom (BT) for IEP1.9 billion in January, is offering EUR1 per share in what he insisted on Thursday was a "full and final" offer. This is almost certain to be rejected by Eircom management as too low.
But the deal with Vodafone means that, if O'Brien ups his offer price slightly to EUR1.09 per share, private investors would be able to recoup all of their original investment in the former state telco. That would take pressure off both the company and the Government.
Outlining details of his bid at a press conference on Thursday, O'Brien revealed that he had already been in contact with institutions holding large tranches of Eircom stock. He would be prepared to work with both existing management and unions, he added.
"I'm handing a substantial sum of money back to go into this," said the former Esat chairman and chief executive, who made a personal fortune of IEP250 million from the sale to BT. The takeover, if successful, would see O'Brien competing head on with his former company.
"BT never asked me if I would go into business again in the business I know best," O'Brien said. "At 42 years of age there are a few years left on the clock."
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