Eircom shareholders have come a step closer to recouping some of their losses following the company's agreement to sell Eircell to Vodafone for €4.5 billion. Almost half-a-million small investors will get shares worth €1.84 each in the British based mobile phone company for every Eircom share they hold.
They will also retain their Eircom shares, which will be worth about another €1.30, giving a total return of around €3.10 - a significant shortfall on the €3.90 which was paid by most of them in the 1999 flotation.
The deal announced yesterday, the largest in Irish history, is highly complex and will not be completed until next March, when shareholders must give their approval at an extraordinary general meeting. What was agreed yesterday was how many Vodafone shares Eircom shareholders will get in exchange for their interest in Eircell (almost one for two).
The actual cash value of the deal will depend on Vodafone's share price next March, which could rise or fall significantly.
Eircom yesterday put a value of €1.91 a share on the deal - based on Vodafone's share price on Wednesday night when the deal was struck. However, that figure includes €250 million of Eircell's debt which Vodafone is assuming. By last night, the actual value of the deal had fallen to €1.84 a share, reflecting a decline in Vodafone's share price yesterday.
When the debt is deducted from the €4.5 billion price, Eircom has received almost €1 billion less than was originally expected when news of the deal broke in October.
Mr Ray MacSharry, the Eircom chairman, said yesterday that the sale "was in the best interest of shareholders and the business itself".
Eircom also rebuffed a bid for the bulk of its remaining business from eIsland, a consortium led by Mr Denis O'Brien. EIsland's offer of €2.2 billion was the equivalent of €1 a share and underpins the €1.30 a share value put on the business after the sale of Eircell.
As part of the deal, Eircom, or any prospective purchaser, is precluded from entering the mobile telephony business for three years. Mr O'Brien reacted angrily to this stipulation last night, calling it "corporate arrogance at its worst". Vodafone had "an absolute nerve to arrive in Ireland, buy Eircell and then dictate what the future owner of Eircom could or could not do within the mobile business".
He said the issue had competition ramifications and it was up to the Telecommunications Regulator, Ms Etain Doyle, to decide whether this clause was allowable. He said he would be surprised if Vodafone would be allowed to decide who could compete in the mobile sector.
A spokeswoman for the regulator declined to comment, saying she was awaiting details of the deal.
Trade unions representing Eircom's staff have also expressed unhappiness over the sale. They believe that Eircell employees who transfer to Vodafone should be compensated for having to leave the company's Employee Share Option Plan, which owns 15 per cent of the company.
The union coalition has put the potential loss to Eircell's 1,300 employees at £45 million (€57 million). They estimated that transferring workers would lose out on shares due to them under the ESOP worth £34,600 (€43,933) each.
Eircom's chief executive, Mr Alfie Kane, seemed to rule out compensation problems yesterday.