Merrill Lynch and AIB Capital Markets have won the contract to advise the Government on the flotation of shares in Telecom Eireann next year. The lucrative contract is estimated to be worth up to £20 million in fees.
The contract, which was announced last night, is the biggest ever awarded by the Government. It was sought by 19 groups.
The Government is to sell up to half of Telecom through an Initial Public Offering next year. The company is currently valued at about £1.9 billion, but some brokers have estimated that it could be worth as much as £4 billion by the time it floats.
Announcing the award yesterday, the Minister for Public Enterprise, Ms O'Rourke, said the timetable for offering the shares was on course. She expects it will occur in the middle of 1999.
"That decision, of course, will be taken having regard to the state of the markets," she said.
Seven consortiums were interviewed for the contracts and it is understood that these included all the leading Irish stockbrokers as well as international heavy hitters. These included Davy and IBI, NCB, Goodbody and ABN-Amro. Also in the frame were Morgan Stanley, Goldman Sachs, Warbury, Dresdner Kleinwort Benson and of course, Merrill Lynch.
Merrill Lynch is said to be expert in the telecommunications flotation field, having handled several other contracts worldwide. Morgan Stanley, which advised the Government on the strategic alliance - when KPN/Telia, Dutch-Swedish consortium took a 20 per cent stake in Telecom last year - is likely to be disappointed.
IBI Corporate Finance was with Morgan Stanley and industry sources said there may have been a feeling that the consortium had got enough business from handling the alliance and perhaps it was somebody else's turn. Davy Stockbrokers already act for the Esat Telecom Group.
A number of brokers - including ABN-AMRO and NCB - brought out reports on Telecom in the run-up to the awarding of the contract. All spoke highly of Telecom and predicted a bright future for the group.
The stock is expected to make up 6 or 7 per cent of the ISEQ index. However, it is likely to be biased towards the small investor.
Ms O'Rourke previously indicated that she would like some mechanism whereby the small investor can get shares. Recently, Telecom's chairman, Mr Ron Bolger, also expressed the wish that customers would get shares in the company, although he stressed that this was the Government's call.
The precise shareholding which will be offered will not be known for some time. Ms O'Rourke said that the Cabinet would decide on this nearer to the date of the flotation.
