The executive officers and senior management of Eircom could have options over shares worth €80 million when the company floats next month. In the region of half of these could be spread between six senior executives, writes John McManus

Eircom put two share option schemes in place last year when it refinanced its borrowings. The outline of the schemes were disclosed in the documentation for a €1 billion bond issue that formed part of the refinancing.

The first scheme, called the C share scheme, is open to the company's six executive officers, led by Eircom chief executive Dr Philip Nolan. The others are the chief financial officer, Mr Peter Lynch; the managing director of the networks and wholesale operation, Mr Herb Hribar; the managing director of the retail division, Mr Cathal Magee; the commercial director, Mr David McRedmond; and Eircom's human resources director, Mr Brian Montague.

Options over 3.6 million shares could be issued under the scheme, according to the bond prospectus.

These shares could now be worth up to €40 million, based on the projected €1.4 billion market capitalisation of Eircom after next month's initial public offering (IPO).

The details of the executives' allocations will be revealed next week when the company publishes the prospectus for its flotation. The price that they will have to pay to exercise the options will be disclosed.

A second share option scheme, the E ordinary share scheme, was established at the time of last year's bond offering. This scheme is open to approximately 120 senior managers, including any of the executive officers who do not participate in the C scheme.

The shares underlying both schemes will comprise a maximum of 7 per cent of the company's undiluted equity, which includes approximately 107 million A and B ordinary shares.

In theory, something in the region of four million ordinary shares could be optioned under the E scheme without breaching the 7 per cent threshold. These could be worth around another €40 million.

The details of the E share option scheme will also be disclosed in the prospectus.

Eircom has been valued at around €3.6 billion by the investment banks backing the deal. The company is expected to float with a market capitalisation of €1.4 billion, as it has debts of almost €2.2 billion. Around €300 million in fresh equity will be issued in a primary placing, putting a rough value of €1.1 billion on the existing undiluted equity.

Three shareholders - owning around 70 per cent of the company - are expected to exit in a secondary placing. They include private equity house Providence Equity, which has around 50 per cent, and Soros Private Equity, which has just under 20 per cent.

Lionheart Ventures, the vehicle through which chairman Sir Anthony O'Reilly owns just under 6 per cent, is also expected to exit.

The departing shareholders could raise up to €800 million.