Eircom stake sale: Blackstone to sell 25pc holding to hedge fund Anchorage - report
Published 20/05/2015 | 12:55
PRIVATE equity firm Blackstone is to sell a 25pc stake in Eircom to hedge fund Anchorage Capital, according to reports.
It is understood that Blackstone will retain a 5pc stake in Eircom, according to a report by Reuters.
The move comes after Blackstone rejected a €3.3bn offer for Eircom, which it considered low.
The telco, controlled by a suite of global private equity groups, confirmed last night that it had received a non-binding approach for the business that gave it an enterprise value - which includes debt and equity - of between €3.2bn and €3.3bn.
Eircom had just over €2.2bn of net debt at the end of 2014.
"While the bidder was very credible, the board believed that, with the business reaching an inflection point, the indicated price range undervalued the group. The matter is therefore not being progressed," said Eircom in a statement.
A spokesman for Eircom declined to comment beyond that statement.
In 2012, Eircom was the subject of what was Ireland's biggest ever examinership. It emerged from that process under the control of lenders and with its debt slashed from about €4bn to €2.4bn.
Last year, Eircom was readying a stock market flotation that would have placed an enterprise value of €3bn on the business. That would also have marked the third time its shares would have been listed on the stock market. Eircom had planned to use €1bn of the flotation proceeds to cut its debt. At the time, that would have knocked about €40m from its annual interest bill.
But the flotation plan was shelved after Eircom was unable to convince potential shareholders that the business was worth as much as its existing owners thought it was.
The decision not to hit the stock market also prompted then chief executive Herb Hribar to announce his departure from the company just over a week later. He has been succeeded by Richard Moat, who was then the chief financial officer.
Eircom's biggest owner is now private equity group Anchorage Capital. The other top owners include Blackstone/GSO, York and Davidson Kempner. Last year, Eircom also approached private equity giants Apax, CVC Capital Partners, and KKR, to see if they were interested in forming a consortium to buy Eircom.
It's not known if the potential buyer that approached the telecoms operator early this year was a trade buyer or a private equity group.
While there was speculation that billionaire Denis O'Brien, who owns the Digicel mobile telecoms group, might have been interested in acquiring Eircom, it's thought that he was not the potential suitor this time around.
Just prior to Eircom's examinership, Mr O'Brien had considered a takeover approach for the firm.
This week, Eircom announced that its revenues dipped 1pc to €311m in its third quarter, with the rate of revenue decline having improved. Its earnings before interest, tax, depreciation and amortisation in the period rose 8pc to €120m, helped by easier comparables in 2014 when the company was hit by storm damage.
Mr Moat said the company's financial performance has been "highly encouraging". While Eircom has suffered from years of revenue decline at its fixed-line business, Mr Moat said he believed that the group was now reaching an "inflection point".
Last month, ratings agency Fitch upgraded Eircom's debt and said that the telco "has delivered the planned transformation of its operations".
Eircom recently initiated a process to extend the maturity of its debt and amend some conditions "to allow greater strategic and operational flexibility". Apart from managing its debt profile, Eircom has also cut its overheads by shedding thousands of jobs over the past few years.