Eircom to be valued at €1.3bn for refloat

EIRCOM has confirmed that it will be valued at up to €1.3 billion when it refloats on the stock exchange later this month.

The company yesterday published its prospectus, which gives detailed information on the initial public offering. Eircom shares will begin trading at between €1.48 and €1.75.

The IPO will raise a total of €831 million for the company and its current shareholders with e300 million of this going to Eircom.

After expenses, the company said it will use the IPO proceeds to pay down part of its debt pile, which is now close to €2.2 billion.

The company will today begin a roadshow of institutional investors to drum up demand for the shares in advance of trading in the Dublin and London exchanges on March 19.

The company will pay its new shareholders a dividend of 11 cent per share in the first year, which will cost €81 million in the first year. Earlier this week, credit agency Standard & Poor's downgraded Eircom's debt rating to junk status, as it feared too much cash would go to pay shareholders a dividend. At the mid-point of the flotation, Eircom shares would have a dividend yield of 6%.

The company also gave a breakdown of its financial performance for the nine months to the end of December 2003. This shows turnover of €1.22bn and earnings before interest, tax, depreciation and amortisation of goodwill of €450m. At pre-tax less, it reported a loss for the nine months of €72m. Eircom also has €133m in cash.

While many investors were badly hit when Eircom was bought by the Valentia consortium in November 2001, the company was expecting strong interest from institutions.

"We are delivering significant improvement with our focus on the core business, driving efficiency and improving our customer offering. Broadband had been rolled out and we are seeing accelerated demand. Our dividend policy will reflect the underlying cashflow generation of the business. I look forward to presenting Eircom to new investors," chief executive Philip Nolan said yesterday.