Eircom shares will trade at a new lower price on the Dublin market today reflecting the demerger of the Eircell operation and its sale to Vodafone over the weekend.
The shares of the newly slimmed down company which closed on Friday at €2.61 are expected to open at around the €1.05 to €1.10 level today because the quoted company no longer includes the Eircell operation. The sale of Eircell to Vodafone was completed yesterday after the majority of shareholders voted in favour of the deal. The exact percentage will be released this morning.
Over the next two to three weeks Eircom shareholders will receive their Vodafone shares according to the terms of the deal. Based on Friday's Vodafone closing price, the Eircell portion of each old Eircom share was worth about €1.54.
Today Eircom shareholders will own their existing shares in Eircom shares - which will have fallen in value - and they will own Vodafone shares quoted in sterling.
When a majority of shareholders voted in favour of the demerger last Friday, Eircell was split from Eircom to become a separate company called Eircell 2000.
Every shareholder on the Eircom share register at 10 p.m. on Friday night was allocated one share in Eircell 2000 - a company specially set up to effect the demerger - for every Eircom share they owned. They retained the same number of Eircom shares they already owned before the demerger.
With the subsequent approval by Eircom shareholders of the Vodafone offer for Eircell 2000, Eircom shareholders were allocated 0.9478 Vodafone shares for every two Eircell 2000 shares held. For example, a shareholder who had 1,000 Eircom shares valued at €2,600 before the demerger and sale, would today have 1,000 Eircom shares worth about €1,060 plus 473 Vodafone shares worth about €1,540 (based on Friday's closing prices). If those shares were bought at the €3.90 flotation price, the shareholder would have a paper loss of €1,300, or a 33 per cent drop in the value of their shareholding.
The potential for clawing back some of this loss will depend on whether a bid materialises for the Eircom fixed-line business from one of the three interested parties, how the Vodafone shares perform and the performance of sterling against the euro.
