Eircom owner seeks revised offer from Isle of Man group

BABCOCK BROWN Capital (BCM), the Australian fund that owns 57.1 per cent of Eircom, has asked Isle of Man-based LIT to consider revising its offer for the group.

BCM chairman Kerry Roxburgh told the 40 or so shareholders attending the company's annual general meeting at the Museum of Sydney that the board had rejected a November 7th takeover bid from LIT plc but that they had invited LIT to reconsider and put forward a better proposal.

Mr Roxburgh told the meeting that "the board has given consideration to life on our own". He said, "We have reserved the name 'Eircom Holdings Limited' for this purpose."

BCM currently pays Aus$19 million (€9.8 million) a year in management fees to Babcock Brown, the Australian investment house whose shares have been suspended since November 20th as it tries to convince banks which have lent it Aus$3.1 billion (€1.5 billion) to delay loan repayments.

Babcock Brown shares last traded at 25 cents, down from more than $27 a year ago.

BCM is now seeking shareholder approval - pending an independent report from KPMG - to pay Babcock Brown Aus$32.5 million (€16 million) to terminate the management agreement between them. A further $12.5 million would be payable if there is a change of control in either BCM or Eircom before April 30th, 2010.

Unseasonably wet and grey weather in Sydney yesterday was matched by the mood of many shareholders at the agm. The meeting was told an increase of 31 per cent in earnings was "largely attributed to the strong operating performance of Eircom". But there was strong concern from the floor about the Irish economy and Eircom's pensions and bad debts.

Mr Roxburgh's presentation revealed that, as of June 30th, 2008, the assets of Eircom's principal pension scheme may not be enough to meet 100 per cent of the estimated value of obligations.

One shareholder asked Mr Roxburgh if the extent of Eircom's defined benefit pension scheme could be "a knockout blow" for the company if the Irish economy does not recover quickly enough.

Mr Roxburgh said: "This is a very serious issue for all corporations that have a promised end benefit." The questioner responded: "It's a very serious issue for shareholders too."

Another was concerned that Eircom's uncollectable debt of €33 million during the year was far too high.

Mr Roxburgh said he would take the matter up with Eircom management.

One shareholder, who did not wish to be named, told The Irish Timesthat "people are so stunned that Babcock Brown may go into administration that it almost seems pointless to rail against it. There has been more anger at previous agms. The name of Babcock Brown really has become quite toxic," he said.

Shares in BCM gained five cents to close at $1.43 yesterday, but they are down around 70 per cent.