Melly seeks to acquire Eircom with higher offer

TELECOMS ENTREPRENEUR Sean Melly has made a bid to acquire Eircom, The Irish Timeshas learned.

It is understood that Mr Melly’s bid is at a premium to the offer of 175 million Australian dollars (€97 million) submitted in mid-April by TaemasBridge, an investment vehicle led by Australian financier and former Babcock Brown executive Rob Topfer.

Mr Topfer’s bid was rejected by Eircom’s trade unions and its employee trust Esot, which owns 35 per cent of the Irish teleco.

According to informed sources, Mr Melly is in “advanced talks” with investment bank JP Morgan about putting together a package of finance to restructure Eircom’s €3.8 billion debt.

Deleveraging Eircom’s balance sheet will be a key component of any successful takeover of Ireland’s biggest fixed-line operator.

Eircom has indicated that its debt is too high and it could default on loans if action is not taken. It recently agreed a deal with its trade unions aimed at saving €130 million a year.

The sale of some assets could also be on the cards. This comes against a background of declining revenues and customer numbers, and increased competition.

Singapore Technologies Telemedia is also believed to have made an offer for Eircom.

The bids have been submitted to Eircom Holdings, a Sydney-listed fund formerly known as Babcock Brown Capital Management. Eircom Holdings, which owns 57 per cent of Eircom, recently appointed UBS to find a buyer for the Irish telecoms group.

It is understood Mr Melly has made initial contact with key players, including the Esot. He could not be contacted for comment.

Mr Melly chairs Powerscourt Investments, a private equity company specialising in venture capital and seed capital. The Irish businessman has successfully established and sold two other telecoms companies over the past decade.

Mr Melly founded TCL Telecom in 1994 – one of the first telecoms firms to compete here against Eircom. TCL was acquired by WorldCom, a US telecoms firm.

In 1999 he set up eTel, which had voice and data operations in central and Eastern Europe. This business was sold to Telekom Austria in 2006 for €104 million, from which Mr Melly is believed to have earned about €10 million. In 2007 he made an unsuccessful €150 million bid to buy Eircom’s masts business through Powerscourt.

Eircom’s restructuring plan involves 1,200 voluntary job losses and pay cuts of up to 10 per cent. The firm appointed former Vodafone executive Paul Donovan as its new chief executive on Friday.

He will take the reins from acting chief executive Cathal Magee and replaces Australian Rex Comb, who left Eircom at the end of February. Mr Comb has since emerged as a backer of TaemasBridge. Mr Donovan will assume the role on July 1st.

Eircom Holdings recently stated that it would return $135 million in cash to shareholders if it had not received a satisfactory bid for the Irish business by then.