Eircom could become takeover target again next year

Eircom could become a takeover target once again next year, after the company's chief financial officer said he expects an over the counter (OTC) or "grey" market for trading its shares to emerge next summer.

Restrictions on the senior lenders who took control of the company last year, limiting their ability to trade in Eircom shares, are due to expire on June 11th, according to Richard Moat. When that restriction expires in June, Mr Moat said, it is likely that an OTC market will emerge for Eircom shares.

Major shareholders
This would allow major shareholders, such as Blackstone, which owns 25 per cent of Eircom, to build a larger stake in the business in anticipation of a possible bid.

The restriction currently in force is in the form of a debt/equity “staple”, meaning that the shareholders are not allowed to sell or buy shares from each other without also selling or buying debt along with it.

“Once the restriction ends, the equity can trade separately. We don’t know exactly what will happen, but there will have to be some form of method for shareholders to trade, probably an OTC,” said Mr Moat.

An OTC or grey market is an unofficial market for an unlisted company’s shares, usually facilitated by a stockbroker. The buyers and sellers deal directly with each other, without having the trades overseen by an exchange.

Eircom yesterday released quarterly results for the three months to the end of September. Its revenues in the period fell 9 per cent to €323 million, which the company blamed on intense competition in the telecommunications market.

The sales dip was countered by a corresponding drop in Eircom’s costs, however. Earnings fell by just 1 per cent to €119 million, after its operating costs fell by 13 per cent.

Since Eircom emerged from examinership last year, close to 900 staff have left the company under a voluntary exit scheme. The company said yesterday that another 1,100 would leave over the next 12 months, fulfilling the 2,000 job cuts announced by its management last year.

'Natural wastage'
"We may lose some more staff after [the 2,000] are gone, but that will be through natural wastage and retirements and so on," said Herb Hribar, Eircom's chief executive.– (Additional reporting: Bloomberg)