More than 2.5 million Eircom shares were sold off by a single investor yesterday as talks aimed at winning union support for the disposal of Eircell seemed to be going nowhere. The seller/buyer's identity was not disclosed last night but market sources said the deal went through yesterday when shares were bracketed at €2.45-€2.52.
At a minimum the deal was done at more than 10 cents above Eircom's all-time low of €2.34 last year. Eircom closed up slightly on the day at €2.48 while Vodafone was down just under 2 per cent at 233p sterling. The British group's bid for Eircell is worth just €1.73 per share, valuing the rest of Eircom at 75 cents.
The deal is indirectly conditional on union support as Eircell employees must agree to transfer to Vodafone. Staff want compensation for giving up their right to receive shares in Eircom under the employee share option plan (ESOP) agreed as part of the flotation in 1999.
Further talks between Eircom and its union coalition are expected before the end of the week after no progress was reported following yesterday's meeting. The unions seem content to let the firm worry about how to preserve the ESOP while 1,300 employees depart for Vodafone.
The Eircom board is expected to review its options when it meets tomorrow. Senior union sources said yesterday that "the pressure is on the company to sort this out". They said March 20th was the date when the firm would hold its emergency general meeting to secure endorsement from shareholders for the sale of Eircell to Vodafone. Notice of the meeting would have to go out long before then. "On the basis of today's discussions we're not making a lot of progress," a union source said. The issue appears to hinge on the payment Eircom will make to the departing Eircell employees to compensate them for also having to leave the trust. This could mean funding another ESOP, a cash payment or some deferred form of compensation.
But union coalition sources said they would not be amenable to the Eircom proposal to alter the terms of the existing plan.
The fact that 260 key technicians on secondment to Eircell can exercise their right of return to Eircom also poses a problem. Section (h) of the appendix on conditions of sale states: "The number of Eircell employees (including Eircom secondees) who have to transfer to Eircell 2000 on a date and terms acceptable to Vodafone shall be sufficient to enable Eircell 2000 to carry on the Eircell business in the ordinary course and arrangements, satisfactory to Vodafone."
The same clause states: "Substantially the same benefits as would have accrued to Eircell employees (including Eircom secondees) as beneficiaries of the Eircom Employee Share Ownership Trust, were it not for the transfer of the Eircell business . . . will accrue to such Eircell employees (including Eircom secondees)".
