EIRCOM COULD be floated on the stock market within the next three to five years as part of the proposed takeover of the business by Singapore-based STT Communications Ltd.
This provision is included in the 225 million Australian dollar cash and shares offer made by STT to Sydney-based Eircom Holdings (ERC) – formerly known as Babcock Brown Capital – which was announced yesterday.
The initial public offering (IPO) option has been included as a potential exit mechanism for the employee share ownership trust (Esot) and other shareholders who might choose to retain an equity interest in the company as part of STT’s takeover.
Following the third anniversary of STT’s takeover of Eircom, shareholders with a minimum 25 per cent holding in the company would have the right to “request” that the new owner use “reasonable efforts” to facilitate an IPO of Eircom. On the fifth anniversary, shareholders with 10 per cent of the equity would have the right to request an IPO.
These timelines would suit the Esot, a staff trust set up at the time of Eircom’s original IPO in 1999 to disburse funds to workers in a tax-efficient manner, which is due to be wound up in 2014. The Esot and STT have signed a “co-operation agreement” that will involve the trust rolling over its 35 per cent stake in Eircom into a new entity, a Cayman Islands-based vehicle called Emerald Communications (ECC).
This holding could increase to 50 per cent, depending on the take-up of the scrip consideration by ERC investors, who own 57.1 per cent of Eircom.
The Esot’s participation in the deal is subject to approval from its members and clearance from the Revenue Commissioners.
Under the terms of STT’s offer, ERC investors would have the option of taking cash or shares or a mix of both. STT’s offer is the equivalent of 1.335 Australian dollars per ERC share. This comprises 0.80 Australian dollars per share capital return to ERC shareholders from the company’s existing cash reserves and the balance from the Singapore company.
ERC shareholders have been offered the alternative of taking shares in ECC on a one-for-one basis or taking a mix of cash and shares. The offer has been recommended by ERC’s directors. A break fee of €4 million will be payable by ERC to ECC if the takeover does not proceed.
Founded in 1994, STT is a backer of Star Hub, the number-two telecoms group in Singapore. It also has interests in fixed and mobile players in Laos and Cambodia and is a backer of Global Crossing, the fibre-optic cable firm with operations in Ireland.
STT was advised by Macquarie Capital Advisers. Rothschild and Merrion Capital advised the Esot.
There was no mention in the announcement of how much STT might invest in Eircom’s network or how it plans to tackle the Irish company’s €3.87 billion net debt.
STT’s takeover was broadly welcomed. Minister for Communications Eamonn Ryan said: “I believe the announcement can give rise to many benefits for Eircom and for the Irish telecommunications sector.”
Commenting on the offer, John Doherty, chairman of ComReg, said: “They’ve had an involvement with Ireland, they understand the IT business and this is the direction that Ireland needs to move in terms of the smart economy. Theyve an understanding of the technology, they’ve a long-term perspective and they embrace competition and, for those reasons, we feel this is a positive step.”
Steve Fitzpatrick of the Communications Workers Union said: “It’s relatively good news. We couldn’t have put up much longer with Babcock where only the bare minimum was invested to keep the network going.”
