Eircom investors to raise €15m in flotation

Unidentified investors stand to raise more than €15 million in the flotation of Eircom this month, writes John McManus

The prospectus for Eircom's initial private offering (IPO) reveals that a company called Yoghal Trading Ltd owns 3.14 million shares in the company, which it will seek to sell in the flotation raising more than €5 million.

The document also shows that Yoghal owns eight million non-voting preference shares in Eircom, which will be redeemed at a cost of €10 million as part of the IPO.

Yoghal's ownership is not disclosed in the document. It is also not registered in Ireland, according to searches of the Companies Office database. The firm has an agreement to vote its shares in Eircom with those of Providence Equity Partners, the biggest shareholder with 44 per cent of Eircom.

Yoghal is understood to represent a private individual who invested directly in Eircom as well as participating through Providence's private equity funds. The price Yoghal paid for its preference shares and ordinary shares has not been disclosed, but the original investors stand to make more than a 100 per cent return on their initial stakes.

The prospectus also shows that senior managers in Eircom will get options ofour million shares in the firm when it floats in Dublin and London this month. Around 120 managers will be able to buy shares under the Executive Share Option Plan put in place last year when the firm refinanced its debt.

The managers can buy the shares at €1.16, which is a substantial discount to the flotation price which will be €1.48-€1.75.

The average allocation per manager will be just under 36,000 shares, which means the managers will be sitting on paper profits of around €17,500. The options can be exercised at any stage over the 12 months after flotation, according to the IPO prospectus published this week.

Four Eircom executive directors are not included in the scheme. They participated in a separate scheme for senior executives, which allowed them buy shares at 12 cent.

Chief executive Dr Philip Nolan has just under 2.6 million shares, although around one million of these were not bought through the scheme. Mr Herb Hribar, managing director of networks, got 1.4 million.

Chief financial officer Mr Peter Lynch got just under 700,000 shares as did Mr Cathal Magee, the head of retail.

Mr David McRedmond, commercial manager, got 524,000 and Mr Brian Montague, human resource director, got 351,000.

The prospectus discloses that Eircom plans to put a new share option scheme in place after its flotation. Under the terms of the scheme, employees can get annual grants over shares worth up to 100 per cent of basic salary.

Dr Nolan's basic salary will be €707,000, Mr Lynch and Mr Magee will earn €466,400, and Mr McRedmond €330,000. Dr Nolan will be able to earn a bonus of 100 per cent of salary if he achieves targets that will be set by the board.

The first grants will be made in the six weeks following the announcement of the company's results for the year to March 2004.