Under the terms of the deal, BCM Ireland Holdings Ltd (BCMIH), a group comprising of Babcock & Brown and the Eircom Employee Share Ownership Trust (ESOT), will offer 2.20 euros ($2.82) in cash for each Eircom share, plus a second interim dividend of 0.052 euros ($0.06). This values the deal at 2.42bn euros ($3.11bn) and is a 4.3% premium on the share price before Babcock & Brown made its preliminary approach in February this year. The deal also gives Eircom an enterprise value of about 4.8bn euros ($6.15bn).

After careful consideration, the independent directors of Eircom intend unanimously to recommend to shareholders to vote in favor of the resolutions to be proposed at the Court Meeting and the EGM, said Eircom chairman Sir Anthony O’Reilly in a statement. The Independent Directors believe that the Cash Offer, which recognizes the successful implementation of Eircom’s stated strategy, is fair and reasonable and is in the best interests of eircom ordinary shareholders, who will receive a substantial return on their investment since the Eircom IPO in March 2004.

Shares in Eircom rose 2.21% to 2.198 pounds ($4.13) on the London Stock Exchange following the news.

Eircom is Ireland’s dominant fixed-line operator with a market share of roughly 79%. Like BT Group Plc in the UK, it fell prey to the prevailing financial wisdom of the time that fixed-line operators should spin out their mobile operations in order to concentrate on core business and allow for flexible growth opportunities for the mobile unit with no shackles to legacy communications. Consequently in 2001 Eircom sold its Eircell mobile operation to mobile giant Vodafone Group Plc for 4.3bn euros ($5.19bn).

But the sale of its mobile arm triggered a VC takeover battle. The carrier was taken private in a 3bn euro ($3.72bn) deal by the Valentia consortium, whose stakeholders included Irish magnate Sir Anthony O’Reilly, financier George Soros, and Providence Equity Partners. The carrier returned to the stock market in March 2004.

Eircom was always going to struggle without a mobile operation, and last September it sold 313 million of its shares to existing shareholders in order to fund the acquisition of Ireland’s third largest mobile operator Meteor Mobile Communications Ltd for 423m euros ($520m), which was then owned by US rural carrier Western Wireless Corp (now owned by Alltel Corp). The acquisition of a mobile arm proved to be a turning point, and it now seems that Eircom’s re-entry into the Irish mobile market has made it a much more attractive value proposition than it was a year ago.

In October 2005, Babcock & Brown Capital Ltd appeared on the scene after it acquired a 10.8% stake of Eircom for AUD 350m ($265m), with an additional 1.7% stake acquired by Babcock & Brown Ltd, Australia’s second largest investment bank, for AUD 55m ($41.6m). The total cost for the combined 12.5% stake was AUD 405m ($307m). Since that time, the Australian investment fund has steadily raised its stake to 28.8%. It has worked with Eircom’s employee share ownership trust, ESOT, which controls a further 21.8%, to submit a takeover offer in April.

This offer as now been accepted, just days after Babcock & Brown confirmed that it would not split up the carrier, but would continue to be run as a fully integrated company following the acquisition.

The deal also signals the return to the telecoms industry of the Pierre Danon, who will become chairman of Eircom once the deal is completed. Danon was the former chief executive of BT’s retail division, BT Retail, but left the UK carrier in 2004 after reportedly clashing with BT CEO Ben Verwaayen.

Danon joined Capgemini SA as COO in November 2004, but 11 months later he was fired after the French services IT company discovered that he had been interviewed for the CEO position at French hotel group Accor SA. Although Danon had been with the company for less than a year, he was credited with leading the turnaround in its ailing North American business.