Former Eircom director initiates legal action

THE LAST of the top-level executives drafted into Eircom after its acquisition by Sydney-based investment bank Babcock Brown three years ago has left the business and initiated a High Court action for damages against it over “contractual issues”.

Peter O’Connell, an Australian who has been Eircom’s director of strategy and regulation since 2007, declined to discuss the reasons for his action, which he initiated in recent days.

Eircom is controlled by Babcock Brown Capital (BCM), a satellite fund listed on the Sydney market which was set up by Babcock Brown to manage Eircom.

BCM recently severed its relationship with the bank. The Eircom employee share ownership trust (Esot) has a 35 per cent interest in the company.

BCM’s share price has lost 64 per cent of its value in the past year.

In February, the value of Eircom’s business was written down by more than €700 million, an exercise that stands as a public acknowledgement that Babcock overpaid for Eircom when acquiring it for €2.36 billion in 2006.

BCM has incentivised its management to sell Eircom, its prime asset. The fund’s current share price implies a market capitalisation on the Aus$130.13 million (€69.7 million), a sum that is greatly exceeded by Eircom’s €3.7 billion debt.

Staff in Eircom were informed of Mr O’Connell’s departure yesterday in a note from Cathal Magee, acting chief executive of the company.

“Peter O’Connell has agreed to step down from his position as director of strategy and regulation of Eircom today. Peter, whose contract expires on May 31st, 2009, is returning to Australia and we wish him well,” the note said.

Asked if Mr O’Connell was leaving the business on good terms, Eircom’s chief spokesman said: “Peter has issued proceedings against Eircom in relation to the expiry of his contract.”

He declined to respond to further questions in relation to Mr O’Connell’s action.

Mr O’Connell’s departure follows the resignation in February former chief executive Rex Comb, another Australian, and the resignation last year of former part-time executive chairman Pierre Danon, a Frenchman.

Australian financier Rob Topfer, who orchestrated the Babcock takeover, stepped down last year.

Mr O’Connell was a founding director of Optus Communications in Australia and was director of corporate strategy and industry development for that business.

His annual base salary was €532,700 last year, according a report for Eircom’s bond investors. He was also eligible for a bonus of up to 75 per cent of his base salary.

In addition, he received employer pension contributions, a company car, healthcare benefits and an accommodation allowance.

It is not clear from the bond report whether there is any provision for termination payments in respect of his contract.