Eircom shareholders have voted overwhelmingly to break up the company just two months short of its second birthday. Eircell, the mobile division of the former State-owned Telecom Eireann, is now set to be handed over formally to Vodafone, the British mobile phone company, tomorrow. The passing of a motion to demerge Eircell from Eircom at yesterday's extraordinary general meeting clears the way for the second part of the complex transaction. Eircom shareholders have already started voting on Vodafone's offer to buy the demerged company for €3.3 billion.
Although Vodafone's offer does not close until tomorrow afternoon, Eircom's chairman, Mr Ray MacSharry, said yesterday that sufficient shareholders had already voted in favour to allow Vodafone to force the remainder to sell.
The complex deal was designed to ensure that Eircom did not have to pay tax on the sale of Eircell. Despite mounting a robust defence of the deal - worth over €1.2 billion less than originally promised - in the face of shareholders' questions, Mr MacSharry failed to win the demerger vote on a show of hands at the meeting.
However, when proxy votes were counted it was revealed that over 99.5 per cent of the shareholders who took part in the ballot on the demerger had cast their votes in favour. Comsource, the Dutch Swedish consortium which owns 35 per cent of the company, voted in favour as did the Employee Share Ownership Plan (ESOP) Trustee, which holds 15 per cent of the company on behalf of the staff. The ESOP cast its vote after balloting its members who came out strongly in favour of the deal.
Shareholders quizzed Mr MacSharry on the rationale behind selling Eircell for €3.3 billion. Vodafone is paying for Eircom through the issue of its own shares which have fallen heavily since the deal was struck last December, wiping €1.2 billion off the original value of the deal.
The chairman told shareholders it still represented the best option for Eircell as it would not be able to meet forthcoming strategic challenges without a strong international partnership.
He told the meeting that no members of the board - including the chief executive Mr Alfie Kane and the chief finance officer Mr Peter Lynch - stood to benefit directly from the deal through bonus payments. Following the completion of the Vodafone transaction, attention will focus next Monday on the fate of the rest of Eircom, which is essentially the fixedline business.
Three consortiums have expressed interest in the remainder of the business and Eircom's advisers have asked the bidders to formulate their proposals by the end of the month. The company then expects to move to substantial talks with one bidder or break off talks with all three. To date, only eIsland, the consortium led by Mr Denis O'Brien, has come close to making a bid.
Eircom's shares are expected to start trading on Monday near the €1.20 level mooted by Mr O'Brien.
Valentia, the consortium chaired by Sir Anthony O'Reilly, is still carrying out due diligence and the third bidder, Mr Dermot Desmond, is still waiting in the wings.
