Babcock & Brown subsidiary earned €50m in Eircom deal

bealtine

The extraction has begun...

Babcock & Brown subsidiary earned €50m in Eircom deal

05 November 2006 By David Clerkin
An Australian corporate finance firm linked to Eircom’s new owner was paid €50 million for advising on the telecom company’s takeover earlier this year.

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=MARKETS-qqqm=nav-qqqid=18634-qqqx=1.asp

An Australian corporate finance firm linked to Eircom’s new owner was paid €50 million for advising on the telecom company’s takeover earlier this year.

Babcock & Brown Capital, the investment fund that paid more than €2.4 billion to buy Eircom in August, stripped out €50 million from the purchase price to fund the payment to a subsidiary of Babcock & Brown Limited (BBL).

BBL is one of the biggest shareholders in Babcock & Brown Capital with a stake of about 7 per cent, with the balance held by institutions and small shareholders.

Its managing director sits on the board of Babcock & Brown Capital.

BBL’s parent company reported after-tax profits of Aus$163 million (€100 million) for the half-year to June, an increase of 48 per cent on the previous year.

Babcock & Brown Capital acquired Eircom after agreeing a deal with the company’s Employee Share Ownership Trust (Esot), which gave the Esot a 35 per cent stake in Eircom following the takeover.

Eircom received a boost last week with the news that it was likely to be awarded the country’s final third generation (3G) mobile phone licence after the original licence winner, Smart Telecom, failed in its court bid to be reinstated as the licence holder.

Smart had been stripped of the licence in February following a dispute with the telecoms regulator over financial performance bonds.

crawler

"We share, but we share begrudgingly,"

Rober Topfer, head of corporate finance at Babcock & Brown and a non-executive director at Eircom

Talking about selling the retail business and milking the core network division.

Full story here :- http://www.unison.ie/business/stories.php3?ca=80&si=1718577

Liam Byrne

Since when does "sharing" involve payments ?

Shouldn't it be "We sell, but we sell begrudgingly in case someone else has a cheaper or better product or better coverage" ?

probe

€50 million is chicken feed.

Christmas and the New Year will shortly be upon us. B&B's fiscal y/e is 31 Dec. Everyone will be screaming for their Christmas bonuses. The B&B lot. The lenders. etc.

B&B's "consolidated" accounts only show fee income for B&B [call them "level 1" entities]. They don't include revenues and expenses for holdings in (call them "level 2") subsidiary companies - the ones that make the real money such as eircom. Example: B&B was in the electricity generation and transmission business last year. Yet their “consolidated” accounts didn’t show revenues (or related expenses) from the operation of generation or electricity transmission plant. E.g. No sales of electricity in revenues and no payroll costs for staff working at these facilities appeared in B&B’s consolidated income statement.

If they were proper consolidated accounts, as we understand the concept in Europe, a €500 million "fee" charged to eircom by the holding company would be eliminated in the consolidation, with the result that it would make no difference to the overall group results. There would be no point in putting through inflated charges of this nature.

However under B&B's accounting system, they get away with sucking hundreds of millions in "fees" and other payments from subsidiaries which end up as income in their "consolidated" financial statements!

The wild west, brought to you from down under..... And they get away with it because nobody is regulating eircom. Ireland’s telecommunications infrastructure is melting like the polar glaciers following almost a decade of "investor" gluttony.

If CRH was based in Australia it could presumably play the same game. They might buy a cement plant in the USA and charge it €300 million in “management fees” which would appear as revenue in CRH’s Irish “consolidated” accounts. Meanwhile the US company might be losing €2 bn a year. None of this nasty stuff would show up in CRH’s accounts, if they could get away with the B&B method…

.probe