Eircom cutting it fine to float this year

Given the uncertainty creeping back into markets over European initial public offerings (IPOs), what now for Eircom’s mooted plan for a €3 billion flotation later this year?

The telco announced this week it is shifting its holding company from Luxembourg to Jersey, to allow it to more easily pay dividends to shareholders. On the face of it, this suggests it may still float. The company may be running out of time, however, to meet its self-imposed deadline of the end of the year.

When in April Eircom first floated the idea of a flotation, the markets were intoxicated on a year-long feast of European IPOs. Following a series of poor quality flotations in recent months, however, the mood music is changing. Eircom may have already missed the boat – at least, the type that sails in calm waters.

This week Blackrock complained that one-third of recent European IPOs are trading down, with eDreams Odiego, for example, off by about 65 per cent. PricewaterhouseCoopers recently reported that 14 European flotations were scrapped in July, although 145 still got away.

But, it warned, “markets are getting tougher”. Not good news for a telco in a still-dicey economy, in a sector with heavy competition, looking for investors to fall in love with its story.

Eircom, sources say, will not announce an IPO at its results briefing at the end of this month. If it wants to get a deal away by the end of the year, it probably has until near the end of October to pull the trigger.

It is widely known that, while preparing for an IPO, the company has simultaneously been sounding out possible buyers. Trade buyers would seem to be thin on the ground, notwithstanding unconfirmed rumours of putative interest from AT&T. That leaves financial buyers, such as private equity, as perhaps the best available bet for Eircom’s lender-owners to exit in the near future.

Eircom has a long history with private equity. It isn’t a happy one.