Cantillon: Eircom needs good call after Hribar exit

The abrupt nature of Herb Hribar's departure from Eircom yesterday closed out a tumultuous couple of weeks for the telco.

Eircom pulled its proposed IPO on September 19th at the eleventh hour, after months of preparation by a clatter of expensive corporate and legal advisers. Hribar had already left the building by the time the company had issued its statement yesterday. There was no handover period to a successor or even the stock quotes you normally get from a departing CEO about what a privilege it was to lead the business and how they’d simply decided the time was right to pursue other interests.

This raises questions as to whether Hribar was nudged towards the exit by Eircom’s shareholders/lenders as a result of the failure to execute a sale or IPO of the business, or whether he simply chose not to continue.

The €35 million in executive bonuses set aside over the past couple of years was contingent on a sale or liquidity event taking place. With the IPO cancelled, Hribar and his colleagues were probably looking at a two-year slog before it could try again and the incentives could be unlocked. Even if an IPO had been executed, Hribar would have been expected to stay on for a period. Perhaps he didn’t have heart for the journey ahead. But there is another potential reason for his departure. By all accounts, Hribar wasn’t a cheerleader of a return to the stock market for two reasons: the original valuation being sought (thought to be about €3.5 billion) was too high, and that the growth story wasn’t quite there.

His reticence is understandable. The last thing Eircom needs is another overpriced corporate transaction that saddles the company with unrealistic targets and places huge pressures on management and staff to execute on those goals. This was Hribar’s second stint with Eircom and he would have previously witnessed the damage done by all the changes of ownership since its privatisation in 1999 and how it stunted growth.

A sale to a trade or financial buyer would probably have been a preferable option but the prospect of that happening faded a couple of months back, again on valuation grounds. Eircom’s owners now need to move quickly to end the uncertainty around the business and ensure the momentum Hribar had injected over the past couple of years is not surrendered.