THE NEW head of the Australian firm that controls Eircom is set to receive significant share-related benefits if the telco is sold.

In a letter issued to shareholders on Tuesday, Babcock Brown Capital (BCM), the majority shareholder in Eircom, said that its new chief executive Andrew Day will receive up to €1.5 million “share performance rights” in BCM. These rights will vest if there is a change of control of BCM, including the sale of “all, or a substantial majority of its investment in Eircom”.

This benefit, which is subject to shareholder approval, creates a significant incentive for Mr Day to pursue the sale of the beleaguered telecoms company.

In a statement issued in February, BCM said that to “maximise near-term value for shareholders”, the board is considering proposals that may lead to ownership changes at BCM.

“The board’s intention is that any proposal put to shareholders would need to reflect not only the company’s cash asset backing, but also the value of BCM’s controlling stake in Eircom,” it stated. “To date however, proposals at or near BCM’s cash backing have not been considered sufficiently attractive to recommend to shareholders.”

BCM bought Eircom in 2006 for €2.36 billion, but recently cut the value of its investment in the company by more than €700 million to reflect a marked deterioration in Eircom’s profit outlook and increasing pension deficit.

In addition to his share-related incentives Mr Day’s employment agreement, which is for a fixed term of two years, includes a basic salary of A$900,000 (€453,548).

He will also receive a short-term incentive payment worth up to 65 per cent of his base salary if he achieves certain performance-related targets.

BCM is the investment arm of Australian firm Babcock Brown (BB), which is facing collapse after a group of foreign creditors voted against a rescue plan negotiated with its major bankers.

BB has been battling to survive for months after the global credit crunch hit its debt-funded expansion model.