Trust refuses eIsland access to names and addresses of members

The Eircom Employee Share Ownership Trust, (ESOT), which controls a key 14.9 per cent of Eircom, has refused to give the names and addresses of its beneficiaries to eIsland, one of the two bidders fighting for control of the company.

EIsland has sought the information in order to mount its own direct mail campaign, aimed at the 13,000 members of the ESOT who are being balloted on their offer and a rival offer from Valentia Telecommunications.

The ESOT trustees favour the Valentia offer and in the documentation already sent out to beneficiaries on both offers, they have formally recommended that members accept the Valentia bid. There is little between both offers in terms of price, as eIsland has bid €1.36 per share while Valentia has offered €1.365 per share; both value Eircom at about €3 billion.

The ESOT has declined to provide the information on the basis that it has already posted a document outlining the offers to its members. It has also taken the view that its beneficiaries are not Eircom shareholders, and thus eIsland has no right to approach them. EIsland is keen to highlight to the 13,000 ESOT members what it sees as the attraction of its bid. Under the deal put forward by eIsland, the ESOT would be able to distribute to ESOT members a surplus of around €200 million on what the trust gets for its stake and the amount it has to pay for 29.9 per cent in the new parent. The advisers to eIsland have proposed a mechanism by which €15,000 could be paid to each member.

The ESOT has disputed the wisdom of the mechanism that eIsland has proposed and said that its plan is to distribute €12,500 to its members in any case. This distribution will not come from the surplus on the sale and reinvestment in Eircom under the Valentia deal, because the surplus is to be reinvested in Valentia securities. Instead, the ESOT plans to distribute some of the Vodafone shares it received when Eircom sold its mobile division, Eircell, to Vodafone earlier this year.

EIsland and its advisers will decide this week whether to ask the Takeover Panel to intervene in the dispute. The consortium also has to decide whether it is worth going to the expense of contacting all the ESOT members.

EIsland must win the support of the ESOT rank and file if it is to have any hope of winning control of Eircom. If it decides that it cannot succeed it will not go ahead with trying to force the ESOT to provide names and addresses. It will leave its offer on the table in case something goes wrong with the Valentia bid.

As it stands, Valentia has the support of shareholders controlling 53 per cent of the company, including the ESOT, but the coalition could fall apart if the ESOT switches sides. The level of support for the eIsland offer is very low. Yesterday the consortium said that, as of the first closing date for its offer, it had acceptances from shareholders representing 1.3 per cent of Eircom.

The group put a brave face on the result yesterday, saying it did not expect shareholders to commit until results of the ESOT ballot on August 27th were clear. The deadline for the eIsland offer has been extended until September 7th to allow shareholders make an informed choice.