ESOT is considering bigger Eircom stake to counter bid

bealtine

http://www.independent.ie/business/irish/esot-is-considering-bigger-eircom-stake-to-counter-bid-1719876.html



By Ailish O'Hora

Saturday April 25 2009

The Eircom Share Ownership Trust (ESOT) could increase its stake in the former state telecoms firm as the company gears up to help fight off an unsolicited offer for the firm's main shareholder Australian fund Babcock & Brown Capital (BCM).

ESOT, which is made up of thousands of former and current employees at the telecoms firm, already owns 35pc of Eircom and has over €100m in cash.

Informed sources said increased investment from ESOT was one of the options being considered while the Eircom board will look at all considerations including a potential strategic partner.

It is understood that the Eircom board will hire advisers within the next week in a bid to find a solution for the troubled telecoms firm, which is saddled with €4bn in debt, that would better serve the interests of all stakeholders in the company than the unsolicited offer.

The €95m offer for the company is from TaemasBridge which is headed up by Australian executive Rob Topfer who originally orchestrated the BCM takeover of Eircom back in 2006.

It has already been rejected by the BCM which owns over 57pc of Eircom, the unions and ESOT.

Early next week the offer will be put to BCM shareholders at an annual general meeting in Sydney.

Yesterday Eircom's acting chief executive Cathal Magee said the Eircom board is attempting to shape a solution that underpins the long-term future of the company.

For example, the Taemas offer document contains no plans for Eircom's future and focuses on extracting value for BCM shareholders who have been burned by their investment in the fund. "The challenges facing the company now are significant -- we have net debt of €4bn and a deficit in our pension scheme," he said.

"We have a cost structure that is no longer sustainable and a market which is contracting.

"We also have a requirement to invest significantly in next generation networks that are vital to the future of the company and the economy."

But he said the Taemas offer and its underlying business offer is a failed one.

Ownership

"The idea that Eircom would be faced with that kind of ownership structure and ethos at this critical time in the company's development would be unthinkable.

"In many ways it has prompted the company to take more control over its future and destiny. Eircom has a pivotal role to play in shaping Ireland's smart economy."

Eircom also issued a statement outlining the corporate developments.

Responding to the statement, the Department of Communications said: "The Irish Government is committed to working with all interested parties to deliver a world-class broadband infrastructure across Ireland. We want to see investment in next generation networks."

Years of private equity ownership at Eircom has taken its toll on the former state telecoms firm where debt levels have been increasing for years.

Mr Magee said there were no easy solutions and tough decisions would be required.

A restructuring plan is already under way at the firm which will include over 1,200 job losses and savings of up to €150m per annum.

Apart from the Taemas offer, there have been others including one from Singapore Technologies Telemedia, which owns Global Crossing, while BCM has also generated some interest from the private equity sector.

- Ailish O'Hora

croo

Eircom has a pivotal role to play in shaping Ireland's smart economy.

More "pivotal role" stuff here ... sounds like all the paper newspapers have been given the same brief and we are being prepared for some taxpayers money being put in. Eircom is expensive, offered outdated products and bad service. With a monopoly they only thing the managed to excel in was stopping comreg from introducing a open market for telecoms. The sooner it's gone the better for everyone.