ESOT looks to taxpayer for second handout

Con Scanlon has hardly put a foot wrong over the past eight months. The chairman of the Eircom Employee Share Ownership Trust is now firmly established as the king-maker in the saga that is the Eircom takeover battle.

He has made it clear he is not for turning and refused to switch his allegiance from Sir Anthony O'Reilly's Valentia Consortium to Mr Denis O'Brien's eIsland. This is despite eIsland offering nine cents per share more and there being no sign - at the time of going to press - of a counter-offer from Valentia, although one is expected.

Mr Scanlon has assembled a phalanx of reasons why the ESOT should not treat with eIsland. Some are persuasive and others seem more than a little spurious.

If Mr Scanlon wanted to, he could get into bed with Mr O'Brien. He just does not want to. That is his decision and one he believes ESOT members will endorse.

One of Mr Scanlon's arguments does have to be challenged. It is his proposition that the difference between the two offers is "peanuts". He has said that anyone who invested £500 (#635) in Eircom shares at the time of the flotation would get only an extra £5.90 by selling now to eIsland and anyone who invested £1,000 would get £11.80

Mr Scanlon is obviously well enough rewarded for his efforts that he would not miss an extra £5 or £10. But it is presumptuous of him to proceed on the basis that the same applies to 400,000 small shareholders. They have lost roughly one-third of the money they invested in Eircom two years ago and are now to be asked to exit without the opportunity of participating in a lucrative leveraged buyout.

It is worth noting that the eIsland deal has been structured to allow ESOT members avoid capital gains tax on the profits they will make when the trust sells its shareholding in Eircom. They are the only group of shareholders who participated in the flotation lucky enough to have this problem.

The reason the ESOT is in this enviable situation is because the Government put it in this position courtesy of the taxpayer.

Asking small shareholders to forgo their £5 or £10 peanut because Mr Scanlon wants to do a deal with Sir Anthony O'Reilly rather than Mr O'Brien is effectively asking Irish taxpayers for a second handout.

It is arrogance of a breathtaking nature, made all the more naked by the ESOT failure even to pay lip service to the plight of the small shareholder.

Small shareholders are having an equally torrid time over at Dunloe Ewart, where they have been relegated to the sidelines as two big shareholders battle for control. Relations between 22.5 per cent shareholder and Dunloe Ewart chairman Mr Noel Smyth and property developer Mr Liam Carroll - who owns 27.3 per cent - are very frosty.

Mr Carroll used the occasion of Dunloe Ewart's annual meeting in Dublin last week to send a few messages to Mr Smyth: he sent his solicitor along to vote down some motions.

By opposing the holding of the next a.g.m. in Belfast, Mr Carroll is indicating he wants Dunloe out of the Northern Irish market. His blocking of a motion to allow the board issue 5 per cent of the company's shares for cash was his way of telling Mr Smyth not to try to dilute his influence.

At least that is what Mr Smyth tells us he thinks is the significance of Mr Carroll's actions. But you have to wonder if this is what Mr Smyth really suspects, or merely what he wants Mr Carroll to think he thinks. Confused? You should be.

Both men's attempts to out-think one another may be mildly entertaining but we should really concentrate on what is going on at Dunloe. Its market capitalisation is #147 million and the large institutions clearly do not think there is much point. They have been abandoning the company in droves. There are, of course, a raft of small shareholders, but unlike Eircom they probably went in with their eyes open and were not encouraged to buy the shares by a Government which then washed its hands of the affair.

At the heart of the Smyth-Carroll spat is the ownership of two Dublin sites. The development sites owned by the company at Barrow Street and Sir John Rogerson's Quay in Dublin are, in Mr Smyth's words, the best development sites in Ireland.

They are among the last few large developments sites on the city centre's southside. They also offer the best chance of being allowed build high-rise apartment blocks as they are close to the nucleus of tall buildings overlooking the Grand Canal Basin.

Whoever wins will make an impact on Dublin that we will have to live with, so we should take an interest.

jmcmanus@irish-times.ie