€2bn cash offer for Eircom rejected

A CASH offer of €2 billion for Eircom was rejected by the company’s examiner and its senior lenders in the past week, The Irish Times has learned.

Mobile phone group 3 Ireland and its Hong Kong-based parent company Hutchison Whampoa, made the offer. The 3 group is the number four mobile operator in Ireland and was the unnamed bidder for Eircom referred to in a statement issued on Monday by the heavily-indebted company.

Hutchison, which has telecoms operations in six European countries, and elsewhere in the world, would have provided the finance for the deal and was also prepared to back a €1 billion-plus investment in Eircom’s fibre network.

On Monday, Eircom said it had been notified by the examiner, Michael McAteer of Grant Thornton, that he had received a conditional, non-binding offer for the company. “Given the level of the offer and its conditionality, the examiner has decided not to proceed with the proposed offer,” the company said.

It is understood the issue of conditionality related to the fact that such a deal would have required regulatory clearance, possibly at EU level.

Such a process could take months to complete and most probably would not have happened within the 100-day timeframe set down by the High Court for the examinership process.

Eircom entered examinership on March 29th and Mr McAteer is due to return to the High Court on May 24th with an update on his progress in executing the proposed scheme of arrangement.

Eircom could exit examinership on that date.

While the cash offer was rejected, it is possible that the bid could be revived, especially when the company exits examinership.

Eircom is currently in the process of a major restructuring to reduce its gross debts from about €4 billion to a level of around €2.35 billion under a agreed plan with senior lenders.

First lien senior lenders have agreed to take a 15 per cent haircut on their €2.7 billion loans.

Another class of lenders has agreed to accept €35 million in loans as settlement for their €350 million debts.

But two classes of subordinated lenders face having their combined €1 billion in debts wiped out.

3’s audacious offer comes at a time when Hutchison Whampoa is positioning itself in Europe as a consolidator of telecoms assets.

In February, 3 Austria agreed to acquire mobile rival Orange for a net €900 million.

In 2011, 3 Group, which comprises Hutchison’s telecom assets in Europe and Australia, reported a 16 per cent rise in revenue to HK$74.3 billion (€7.3 billion).

In Ireland, 3 cut its losses before interest and tax by 31 per cent to €54 million. Its sales increased by 53 per cent to €150 million.

The company has spent about €800 million on its 3G network here since entering the market. It is ranked behind mobile rivals Vodafone, O2 and Meteor, which is owned by Eircom.

3 has previously been linked with Eircom and separately with a bid for its mobile arm Meteor.

Eircom’s revenues fell by 8 per cent to €1.689 billion for the 12 months to the end of June 2011, down 8 per cent on a year earlier.

Its Ebitda was €647 million, down 4 per cent on the previous year and it closed the period with €459 million in cash.

Hutchison has also expressed an interest in acquiring other assets in Ireland as part of government plans to sell stakes in various state-owned businesses.

As a group, Hutchison Whampoa reported profits of HK$56 billion for 2011. Its revenues rose by 22 per cent to HK$387 billion.