Babcock urged to sell off Eircom stake

Eircom owner Babcock & Brown Capital has assured its shareholders that it will provide an update on its investments by the end of next March.

The move came in a response to a demand from the fund's second biggest investor, UK hedge fund manager PendVest, that it consider winding up and selling Eircom and other assets.

On November 28th, PendVest demanded that Babcock hold a special meeting to vote on returning half of the Australia-based fund and consider winding up because its shares performed poorly.

PendVest, which holds a 5.2 per cent stake in Babcock & Brown Capital, agreed following discussions with Babcock's directors that the firm's telecommunications assets were "best realized over the medium term and not in the short term," Babcock said yesterday.

Eircom has mooted a split between its retail and wholesale divisions but no decision on the matter has emerged as yet. The firm is engaged in a redundancy programme that could cost as much as €75 million.

Babcock Capital's shares fell 1.5 per cent to A$4.59 (€2.73) at the close of trading in Sydney. The fund, managed by its parent Babcock & Brown Ltd, jumped 5.2 per cent on November 29th after it received PendVest's demands. It has climbed 3.6 per cent this year, lagging behind the 15 per cent gain in the S&P/ASX 200 Index.

The fund posted a full-year net loss of A$132 million in August after earlier forecasting a profit of as much as A$30 million.

PendVest said Babcock should consider selling its investments in Eircom and Golden Pages, which runs Israel's largest print and online phone directories.

PendVest also demanded the company address A$122.6 million in fees paid to the parent, saying some of the fees should be returned to shareholders. Babcock said it agreed with PendVest that its shares were trading at a discount to its assets, and will update shareholders by the end of March next year. Babcock will also disclose fees that it pays its parent, it said. - (Bloomberg)