Valentia confirms flotation of Eircom
The company will raise around €300 million from the issue of new shares in Eircom Group plc. It could also raise up to €600m through a "substantial" secondary offering of shares from existing shareholders.
Earlier this week the last hurdle paving the way for the flotation consent of bondholders to resume dividend payments was cleared.
The quick flotation of Eircom comes as telecoms shares are back in favour with investors. The company says now is the ideal time for launching an initial public offering.
The company's major shareholders, Providence Equity Partners, Soros Private Equity and Tony O'Reilly the chairman are likely to sell their entire stake in the company. Eircom's Employee Share Ownership Trust (ESOT) will hold onto its 29% stake.
Eircom has appointed Citigroup, Deutsche Bank, Goldman Sachs International and Morgan Stanley have been appointed as joint bookrunners to the offer, but it is not expected to be heavily marketed to small investors who suffered losses the last time Eircom floated.
No firm date for the flotation was given yesterday but the company said it would happen in the first half of March. Analysts expect Eircom to be valued at around €3.5 billion.
The money raised from the listing will be used to pay down the company's debt, which stands at €2.1bn.
Eircom was bought by the Valentia consortium just over two years ago for €3bn after a lengthy bidding battle with the former Esat boss Denis O'Brien.
Announcing the flotation plans yesterday, Dr O'Reilly said the Valentia consortium has substantially completed its objective, which was to turn around the performance of the business.
"The company is now focused on its core business of fixed line telecommunications, it is more efficient and it is delivering a lower cost and higher quality service to its customers. As a result, Eircom can now be returned to the market as a plc with long-term institutional shareholders," he said. The company also released financial results for the nine months to end December 2003 yesterday.
They showed turnover of €1.22bn and earnings before interest, tax, depreciation and amortisation of goodwill (EBITDA) of €450m. The company did not provide pre-tax profit figures.
The company said it plans to reduce its workforce to 7,000 by 2008. It currently stands at 8,191. When the company was taken private it had over 10,000 employees.
As part of the initial public offering, Eircom's board will be beefed up and several new non-executive directors will be appointed.
Dr O'Reilly will remain on as chairman as will deputy chairman Con Scanlon, who represents the ESOT on the board.
The Valentia consortium have made a good return on their investment in Eircom.
The existing shareholders were last year paid a €540m dividend and are set to net hundreds of millions from their initial investment.
Although the price paid was over €3bn, the bulk of the takeover was funded through debt.
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