Eircom staff vote in favour of Singapore telco's takeover bid

EIRCOM staff yesterday overwhelmingly approved a takeover of the company by Singapore Technologies Telemedia (STT).

The results of a ballot were formally tallied by yesterday morning, with 97pc of the 8,672 valid votes in favour of the deal, which is expected to be sealed by January 4. The favourable ballot of members of the Employee Share Option Trust (ESOT), which includes current and retired employees, had been anticipated, with ESOT directors having previously indicated that they would back the €138m (A$225m) takeover bid. ESOT, which has over 12,000 members, controls 35pc of Eircom.

About 6pc of them voted in the ballot. While the percentage of voters was deemed by an industry source to have been respectable, there was some surprise expressed at the extent of support for the takeover, even though it was expected to be carried.

Eircom Holdings, the Australian fund that controls 57.1pc of the telecoms company, plans to hold a shareholder vote on the STT takeover on December 15, immediately prior to its own annual general meeting in Sydney.

Shareholders in Eircom Holdings (ERC), formerly Babcock & Brown Capital, can opt for either a cash payment of 40 Australian cents per share, or one share in Emerald Communications, the Cayman Islands-based special purpose vehicle being used by STT to secure control in Eircom, for every share held in ERC.

The shareholders are also receiving a cash return from Eircom Holdings under a capital reduction programme and can also opt for a mix of stock and cash under the takeover deal.

Debt

ESOT has agreed to roll its 35pc stake over into Emerald Communications. The members have received €770m tax free since the trust was established in 1999.

The change in ownership will be the fifth in less than a decade for Eircom, which has a nearly €4bn debt pile and which had a €435m pension deficit at the end of last June. Under the terms of the takeover, it's possible that ESOT could have to stump up over €10m for additional shares in Eircom by 2011 under the structure of the deal with STT.

STT has previously indicated that it might float Eircom on the stock exchange again as early as 2012.

That would provide for a return to shareholders, although STT has also committed to establishing a grey market for the stock if an initial public offering does not take place by 2014.

Eircom's new owner is likely to be nervously eyeing the Irish telco's recent financial performance.

Last week, Eircom reported that its operating profit slumped 25pc to €58m in the first quarter of its financial year, compared to the same period last year, as revenue fell 9pc to €468m.