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19 February 2014
Rarely would you expect the battle to become Ireland's top entrepreneur to cause quite such a kerfuffle in the City. Since October, the Emerald Isle has been consumed with a fight to take the country's telephone company Eircom private, with HJ Heinz chief executive Tony O'Reilly slogging it out with telecoms entrepreneur Denis O'Brien.
On this side of the pond, the bidding war saw Slaughter and May pitted against Freshfields Bruckhaus Deringer, with an enormous supporting cast. The Valentia consortium, put together by O'Reilly, called in Freshfields and included Soros Private Equity Partners (which got extra representation from Macfarlanes), Goldman Sachs and Providence Equity Partners (which also called in Debevoise & Plimpton). Warburg Pincus, advised by Willkie Farr & Gallagher, was there for a while too, before the price became too high.
The EIsland consortium, O'Brien's responsibility, brought together JP Morgan Chase & Co (which brought in Clifford Chance), Credit Suisse First Boston (which also used Latham & Watkins) and Spectrum Equity Investors (which turned to Edwards & Angel), and the consortium itself was advised by Slaughters. And the winner is Freshfields - or at least that is how it is looking. It has been a long and winding road, but the end now seems to be in sight.
It all started in October last year when Eircom entered into negotiations to sell its mobile business Eircell to Vodafone. The Irish government had sold its 50.1 per cent controlling stake in the business only a year earlier, in what was then the largest privatisation in Ireland's history. After the Eircell sale, Eircom's future began to look wobbly. In December, the company announced that it had received a bid from EIsland for its fixed line businesses. It had sent it on its way, the statement said, as EIsland had undervalued the business.
But O'Brien came back for more and in February made another offer. Then in April O'Reilly entered the battle, and things hotted up: Valentia offered euro1.27 (82p) a share, valuing Eircom at euro2.8bn (£1.76bn), EIsland offered euro1.36 (85p) and then Valentia upped its bid to euro1.365 (86p), valuing the company at euro3bn (£1.89bn). All the signs are that the deal is now done, amid big pats on the back for Freshfields, Macfarlanes and Debevoise. The latter played a bigger role than Macfarlanes in the proceedings, because Debevoise ended up providing the US tax advice to the consortium. Freshfields handled all of the US securities work itself, so the Freshfields team, headed by Edward Braham and Mark Rawlinson in corporate, has gone the distance. Slaughters' team, run by Marc Hutchinson, may soon have to admit defeat.
Three of Ireland's top five have seen the battle through to the end as well - Arthur Cox chairman James O'Dwyer advised long-term client Eircom, A&L Goodbody managing partner Paul Carroll teamed up with Freshfields and William Fry was on what looks to have been the losing side.
What clinched the deal for Valentia was the support of both the employee share ownership trust (Esot), which owns 15 per cent, and the backing of Comsource, the company owned by Telia of Sweden and Netherlands company KPN, which owns 35 per cent. Comsource, incidentally, is also represented by A&L Goodbody and the firm has had to build what one partner describes as "a very, very solid Chinese wall". Comsource has accepted the Valentia offer in the absence of a highly unlikely bid above euro1.50 (94p) a share. So the deal is all but done.
Not only has the buyout been a complicated six-month ordeal, it has also broken new ground. Though the directors of Eircom have taken a lot of stick for the mess they got into, it has to be said that they have been ahead of the game. They are probably the first of the once government-owned telecoms companies in Europe to be taken over by a private equity house. One could argue that some of the other telecoms companies could do with looking at it - the parallels with BT's sell-off of its directories business Yell and its planned sale of the wireless division are unmistakable. The mobile deal was also a first.
So just when you thought that Ireland led the way only in the Eurovision Song Contest, here it is leading the way in the European telecoms business - and paying plenty of fees to City lawyers to boot.