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Eircom's bonanza fades as Aussies eye E2.20 a share
[February 23, 2006]

Eircom's bonanza fades as Aussies eye E2.20 a share

(Daily Mail Via Thomson Dialog NewsEdge)DREAMS of the mooted takeover of Eircom becoming a cash bonanza for shareholders took a knock last night.

Robert Topfer, executive director of Babcock & Brown, has said his Australian bank is planning to offer no more than E2.20 a share for Eircom.

His stance will disappoint ESOP, the Eircom employee shareholders' trust that currently has a 22pc stake in the former telecoms monopoly.

Babcock & Brown has been circling cautiously, buying Eircom shares in the market as a prelude to making an outright bid for the telecommunications giant.

The E2.20 price tag is, however, well below what even the most pessimistic Irish analysts have predicted.

And although some shareholders may see Topfer's words as no more than bravado at an early stage of what may yet become a protracted and bitter takeover battle - ESOP also has the ability to block any takeover deal - they will also feel a certain chill at the possibility that he means just what he says.

Stuart Draper, head of research at Dolmen Securities, has this week suggested V2.25 is a base figure for a successful bid.

And Goodbody Stockbrokers predicted a range of between V2.25 and V2.30 per share, which even in the middle of that range would only offer, 'a modest premium for shareholders'.

Babcock & Brown's Topfer also said that the bank would continue to build its stake in Eircom until it reached the 30pc threshold, beyond which a takeover bid would be triggered automatically.

Earlier this week the Australians lifted their stake in Eircom to 18pc, having acquired a 12.5pc stake last year for a reported V400m.

Eircom's shares then rose 4c to V2.20 after the Irish telco said the Australians had made a formal approach.

The shares traded for much of yesterday on the Dublin stock market at the V2.20 favoured by Topfer, falling at one stage to V2.19, but ending with a 1c rise on the day at V2.21.

Topfer revealed his company's accumulation strategy for Eircom in an interview in Australia.

He told The Age newspaper in Melbourne: 'I don't think we will be buying stock at above V2.20.' He also said Eircom was an attractive investment profile for Babcock & Brown because of its exposure to Ireland's young and growing population and the strong pace of growth throughout the economy.

'Telcos are a GDP business and Ireland probably has the best GDP profile of any country in Europe,' he said.

Should the takeover negotiations be successful, Topfer said Babcock & Brown and its associated companies had the capacity to underwrite a bid on its own, but it was likely to bring in other investors and sell down its stake.

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