Eircom staff reap almost €1bn tax-free since 1999 privatisation
Average distribution to trust members is €70,000
Trade union official Con Scanlon has been appointed as a non-executive director with Merrion Investment Managers, an arm of Ballsbridge stockbroker Merrion Capital.
About 14,000 current and former employees of Eircom will have shared €980 million in tax-free payments by the time the employee share trust (Esot) is formally closed around the middle of this year.
This will bring the average tax-free distribution to the trust members to €70,000. Trust members with the full allocation of shares, based on length of service, will receive more than this.
This emerged yesterday in a statement announcing that trade union official Con Scanlon had been appointed as a non-executive director with Merrion Investment Managers, an arm of Ballsbridge stockbroker Merrion Capital.
Merrion and Mr Scanlon are well-known to each other. Mr Scanlon was one of the architects of the Eircom Esot in advance of its privatisation in 1999, while Merrion was a key adviser to the Esot for years.
Under an agreement with the Revenue Commissioners, the Esot was due to be wound down in 2014 but those plans were accelerated after Eircom’s examinership process last year. Most of the trust members are former employees.
The examinership resulted in the company’s gross debts being reduced to €2.35 billion, from €4 billion, and senior lenders taking 100 per cent ownership of the company.
Before the examinership, the Esot was the junior shareholder in Eircom with a 35 per cent stake. The balance was owned by Singapore investment group STT.
Eircom staff initially secured a 14.9 per cent stake in advance of the privatisation. Some of this stake was given to the Esot in return for changes to work practices agreed with staff.
Under an arrangement with the Revenue Commissioners, annual payments to members up to a certain threshold were permitted on a tax-free basis.
Eircom changed hands five times after that, with the Esot participating in each transaction as a significant equity holder until the examinership process that resulted in its lenders taking over in 2012.
Mr Scanlon recently stepped down as general manager of the Esot. He is also a former deputy chairman of Eircom.
Mr Scanlon is the first outsider to be appointed to the board of Merrion Investment Management, which has about €900 million in assets under management. It is understood that he passed the Central Bank of Ireland’s fitness and probity tests before taking up his appointment with Merrion.