Eircom takeover in sight as shareholders vote

EIRCOM’S TAKEOVER by Singapore-based STT Communications Ltd moved a step closer yesterday when shareholders of its Australian parent company voted overwhelmingly in favour of the A$225 million (€140.2 million) cash and shares offer.

Eircom Holdings Ltd (ERC) said 110.2 million votes were cast in favour of the deal at its annual meeting. This represented 99.68 per cent of all ballots cast.

Shareholders were offered cash, shares and a mix of both in the new business. No details were released yesterday of how many, if any, investors in ERC chose to take stock in the new entity.

ERC will today seek approval from the Federal Court of Australia for the scheme of arrangement to give effect to the change of ownership.

If this is granted, ERC is expected to delist from the stock market in Sydney on Thursday. The deal should close in early January.

Eircom is being acquired by Emerald Communications, a Cayman Islands-registered vehicle being used by STT and the company’s employee share ownership trust (Esot) to conduct the takeover of the Irish phone group. This vehicle will become Eircom’s fifth owner in little more than a decade.

Eircom also yesterday published a trading update for October and November, which showed a continued deterioration in its revenues and earnings.

Eircom said it achieved earnings before interest, tax, depreciation and amortisation (Ebitda) of €109.4 million on revenues of €308.6 million for the two-month period. While its earnings were flat across the group, its mobile earnings – represented by Meteor – declined by 2.5 per cent.

This was offset by a 2.4 per cent rise in fixed-line Ebitda.

Its revenues, meanwhile, declined by 7.9 per cent when compared with the same two months of 2008.

Eircom said its Ebitda for the year to date – its financial year starts on July 1st annually – was €278.6 million, a decline of 1.7 per cent on the same period for 2008.

Its revenues for the five-month period amounted to €776.6 million, a decline of 8.4 per cent.

“These results reflect the continued challenging operating and economic environment in Ireland, as well as increased competition,” the company stated. “Various short- and medium-term remediation initiatives to improve cost performance are planned.”

Eircom said the widespread flooding in Ireland in November resulted in the company paying €1.1 million in extra overtime costs. This weighed on its fixed-line Ebitda.

Its mobile earnings were affected by an additional €1 million of discretionary advertising spend in November and by additional stock shipped into retail channels.

In a slide presentation to shareholders in Australia yesterday, ERC chairman Kerry Roxborough said Eircom’s net debt was €3.96 billion. Investors were told that the company continues to operate within its covenants with lenders.

Eircom’s Esot will continue to be a major shareholder in the company.