Double or quits for Eircom investors

THE Eircom flotation today will leave key investors such as billionaires Tony and O’Reilly and George Soros substantially better off.

It is expected that the Eircom shares will be priced at €1.60 per share around the mid point of the initial price range indicated.

Some analysts believe the price may even be lower in order to get the issue away.

Whatever way it works out George Soros and Tony O’Reilly and Providence Equity Partners will have seen their investment in Eircom double since they took the company private.

At one point it was expected that Mr O’Reilly would make up to €170 million but that could now be less than €70 million.

It has been rumoured, but not established, that Irish institutions have not been great fans of the re-flotation of Eircom which came to the market initially in July 1999.

When the company was taken private, Providence, Mr Soros and Mr O’Reilly invested €465 million. Providence put up roughly €310 million; George Soros €125 million and Tony O’Reilly €30 million.

Recent best guesses suggest the shares will be worth a total of 640 million to the troika which on top of the €279 million they got last year in dividends will see them almost double their initial investment.

Brokers yesterday said the markets had a bad day and one believed the shares may float at €1.58.

As the flotation day moved closer the price range has been narrowed to €1.53 - €1.71 against the initial road show figures of €1.48 - €1.75.

How the shares perform could be determined by the extent of the over subscription for the stock.

Kevin McConnell, senior analyst, Bloxham Stockbrokers said if demand is weak then the share price may not show any dramatic rise.

It will rise tomorrow unless it comes in at the higher end of the indicated price, he said.

But by how much and for how long is difficult to ascertain. This is still a difficult market and it is obvious that the climate is different to the last flotation.

“This is not 1999 and the Celtic Tiger is no longer a factor. Global economies are still struggling so the market for shares is more circumspect,” observed another analyst.

However, with nearly half the investment banks in the world tied up in this Flotation.

Mr McConnell said it was important the shares show some backbone in the weeks ahead.

Hibernian Investment Managers have already indicated they believe that in the “short term” the shares will probably show a return for those who buy into them. After the experience of the first flotation when ordinary investors lost an estimated E400 million there is much more caution this time around.