US hedge fund seeks Eir voting control as rival York exits

Deal would tip Anchorage Capital voting rights in phone group above 50 per cent

A deal would mean that Eir would effectively have had eight controlling shareholders in the past 18 years.

A deal would mean that Eir would effectively have had eight controlling shareholders in the past 18 years.

 

Eir’s biggest shareholder, Anchorage Capital, plans to acquire part of rival US hedge fund York Capital’s almost 10 per cent stake in the phone group, which could tip its voting rights above the 50 per cent level.

A deal would mean that Eir, formerly Eircom, would effectively have had eight controlling shareholders in the past 18 years.

It would also see Eir’s other major shareholders, Singaporean sovereign wealth fund GIC and hedge fund Davidson Kempner, each buying part of the York Capital holding, according to sources.

The transaction would result in Anchorage – which owns 36.4 per cent of Eir’s equity but a higher voting percentage, believed to be between 45 per cent and 49 per cent – taking a controlling interest in the phone group. GIC currently owns 16.3 per cent of the equity and Davidson Kempner owns 11.8 per cent.

The Competition and Consumer Protection Commission said in a statement on its website on Wednesday that it had been notified of a proposed acquisition by Anchorage of “sole control of Eircom”, prompting initial speculation that it was making an outright bid for the group.

Eir issued a statement in the early afternoon saying Anchorage’s planned stake increase “is a positive endorsement of the group and its strategy”.

Debt restructuring

The former State-owned phone group incurred €4.1 billion of debt through five changes in control in 13 years, before it filed the State’s biggest examinership case in 2012. This resulted in its most senior lenders, led by Blackstone, seizing control of the company as €1.8 billion of its borrowings were written off.

Blackstone sold its interest to Anchorage last year, while York Capital accumulated its stake the debt restructuring.

A deal involving York Capital selling its stake will further concentrate the equity ownership of Eir, as it and the other three main shareholders currently own almost 75 per cent of the equity. Their voting position, however, is higher.

GIC took its 16.3 per cent stake in Eir in June from a group of investors, largely hedge funds, that converted debt into equity in 2012 at the time of the restructuring. It paid €232 a share at the time, valuing the company at between €3.3 billion and €3.5 billion.

In a trading update last July, the company said its sales had grown by an estimated “low single-digit” percentage in the three months to the end of June, compared with the same period last year – the fifth consecutive quarter of growth following years of decline.

The company had planned to float on the stock market in 2014, but had to pull the plan late in the day.