Eircom seeks advice to break from private equity ownership

EIRCOM IS hiring corporate finance advisers to develop a plan to take the heavily-indebted business out of private equity ownership, a move that steps up its opposition to an unsolicited takeover approach from former director Rob Topfer.

Acting chief executive Cathal Magee said Eircom was looking for a “commercial solution” that underpinned the strategic development of the business in the longer terms.

Asked if the business should be nationalised to ensure investment in its network, he said that was a matter for the Government.

“What we want to do is develop a solution that’s a clear departure from the failed models that have been pursued to date.”

The move to engage financiers comes as shareholders in the company’s Australian owner, investment fund Babcock Brown Capital (BCM), prepare to vote next Monday on a proposal to sever links with its parent, bankrupt investment group Babcock Brown.

Mr Topfer orchestrated Babcock’s takeover of Eircom three years ago. BCM and Eircom has set themselves against his plan, with Eircom arguing that another period in private equity ownership would compromise its development.

“What we’re making clear today is that we don’t support the Topfer proposal that’s on the table. We want to shape a solution that underpins and safeguards the long-term future of the company. We want to develop a solution that works for all stakeholders in the company, and that all stakeholders can support.”

Asked whether his preferred option was for a trade sale, Mr Magee said it was too early to state what the options were.

“The existing model doesn’t work and we were also very critical of the Topfer plan. I have been very upfront in acknowledging the shortcomings of the existing ownership structure and model.”

Mr Magee said Eircom had a pivotal role to play in shaping Ireland’s smart economy.

“We want to ensure that telecoms and Eircom are at the centre of the next phase of economic development in Ireland.

“That’s going to require that it has a capital structure – its got challenges with its pension scheme and its cost structure, and challenges with the migration to next generation of technology.”

It is likely that the financiers will be charged with developing firm proposals before the end of June, the date by which BCM proposes returning most of the cash on its balance to shareholders.

Mr Topfer has threatened to withdraw the approach from his TaemasBridge vehicle if BCM’s shareholders vote on Monday in favour of a remuneration and termination package for its new chief executive Andrew Day. The package incentivises Mr Day to execute a sale of the business.