O'Brien pulls out of contest to be next owner of Eircom
Only two takeover proposals are now likely to be tabled before the deadline this Friday
BUSINESSMAN Denis O'Brien has pulled out of the race to take control of Eircom, just three days before a deadline to table takeover bids.
It means only two proposals are likely to be tabled when the deadline for bids closes on Friday, both from parties who are already deeply involved in efforts to restructure the troubled company's €3.75bn of debt.
Eircom's independent directors have set a deadline of this Friday for bids to control the business to be submitted.
Unlike a normal takeover, anyone buying Eircom is effectively buying the company from its top lenders, which means that the process is unusually complicated. This is why independent directors sent a letter to interested parties, asking for offers to be tabled under a pre-set template.
Bidders were asked to set out how they planned to tackle the Eircom debt crisis; who would run the business under their plan; and how much investment the prospective owners planned to inject into the company.
Directors will consider offers, but the decision on which bid -- if any -- succeeds ultimately rests with Eircom's senior lenders, who are owed €2.4bn.
In a brief statement issued yesterday, Mr O'Brien said he had informed a committee representing Eircom's top lenders that he would not now be proceeding with a proposal for the company.
Last night, sources said no proposals had been tabled under the new format so far, but it looks certain that one bid will come from the current owner STT, which is trying to buy back the business with the promise of a €300m cash injection.
A second offer will be submitted by a group of lenders owed €350m, who are offering to swap some of the debt they are owed for shares in Eircom.
An employee ESOP that currently owns 35pc of Eircom is understood to have backed the STT bid, as has a minority financial investor, CVP.
The approach from Mr O'Brien's Digicel was the only firm interest from a bidder that is not already heavily involved in the troubled company.
By pulling out, Mr O'Brien has drastically reduced the pressure on STT to lift the cash element of its bid for Eircom.
The 'second-lien' lenders that have tabled an offer have so far refused to include any new cash in their proposal, seeing the value of loans they are willing to cancel as the bid's main value.
Ownership of Eircom is up for grabs because it has breached the covenants on its best-secured corporate loans -- so the top lenders will decide who wins a takeover battle that is due to move towards completion on Friday.
However, sources last night said the approach from the telecoms entrepreneur had reached an advanced stage.
Eircom had given the team working on the Digicel bid access to a "data room" of detailed financial information about the company. The team was also given a copy of an independent business review.