THE AUSTRALIAN fund that controls Eircom, which is examining a number of approaches for the heavily-indebted telco, has told investors that it will restructure its interest in the business if no sale proposal is agreed before the end of June.
Eircom Holdings, listed in Sydney and formerly known as Babcock Brown Capital (BCM), said in a quarterly update for shareholders yesterday that “certain parties” are conducting further due diligence on the business.
Disclosing a big drop in quarterly profits at Eircom, the fund indicated that Eircom’s management was making presentations this week to potential bidders.
A successful bid would require support from the Eircom employee share ownership trust (Esot), owner of 35 per cent of the firm.
None of the suitors for the business were named by Eircom Holdings, and Eircom itself declined to comment.
However, Eircom Holdings chief financial officer Haydn Vella questioned the practicality of an approach for the business from Irish entrepreneur Seán Melly in remarks to Australian publication Investor Daily.
“Whatever [he] has in mind it might be difficult, because there are change-of-control provisions in the debt agreement [of Eircom Holdings],” Mr Vella said. “That is why most of the focus is on Eircom Holdings, rather than at the Eircom level itself.”
The other suitors for the business include former BCM director Rob Topfer, whose approach has been rejected by Eircom, as well as Singapore Technologies Telemedia.
Private equity firms CVC Capital Partners and Arcapita are also believed to be in the frame.
Eircom Holdings plans to have a proposal for investors by June 30th, but said any such proposal would have to reflect “appropriate value” for its 57 per cent shareholding. The fund will restructure the business otherwise, subject to capital market conditions.
Any restructuring would establish a more sustainable capital structure for Eircom, simplify its ownership structure and replace “current constraints” in shareholder agreements with improved governance and more accountability for the firm’s performance. The constraints are not specified.
Eircom’s operating business reported a 27 per cent fall to €69 million in operating profit in the three months to March, the third quarter of its fiscal year. Revenue fell 5 per cent to €488 million, compared with the same period last year. The company, whose debt stands at €3.36 billion, saw profits fall in its fixed line business, while profits rose in its mobile business Meteor.
Fixed-line revenue fell 7 per cent to €385 million, and earnings before interest tax depreciation and amortisation (Ebitda) in the unit dropped 5 per cent to €138 million. Meteor revenue fell 2 per cent to €117 million, while Ebitda rose 17 per cent to €35 million.
