ESAT Telecom is raising over $40 million (£29 million) through a new share issue, which will also see the group's major institutional shareholders sell over a quarter of Esat's shares to other institutional investors
Esat chairman Mr Denis O'Brien is also taking advantage of the secondary share offering to sell 200,000 shares which will net him $6.2 million (£4.4 million) if the shares are sold at last night's market price of just over $31. The 3.1 million shares that Mr O'Brien is retaining are worth $96 million (£69 million) at yesterday's $31 price on NASDAQ. His stake in Esat will fall from 19.3 per cent to 16.9 per cent after the sale and share issue.
The $40 million-plus being raised by Esat will not be used to reduce the group's debt, but will be used for general corporate purposes, including investment in new infrastructure and switching systems.
The exact price of the secondary share offering will be struck in the week beginning June 22nd and will follow an international roadshow to Irish, American and European investors. The offering of the 6 million shares - the 1.3 million being sold by Esat and the 4.7 million being sold by the institutions - has been underwritten by Davy Stockbrokers and CSFB for the Irish and European offering and by CSFB, Donaldson Lufkin & Jenrette and Cowen & Company in the US and Canada.
Apart from the 1.3 million new shares being sold by Esat, the balance of the 6 million share offering will be shares being sold by the biggest institutional shareholders. These include venture capital group Advent which currently holds 17.6 per cent of Esat, John Hancock which holds 6.8 per cent, Metropolitan Life and Merchant LBO which each holds 6.4 per cent and Soros Capital with 5.2 per cent.
Advent has been a substantial investor in Esat since 1994 when it took a 35 per cent stake in Communicorp, the predecessor of Esat, and has been looking for an exit. Esat's chief financial officer Mr Neil Parkinson said that it is normal practice six months after a NASDAQ flotation for institutional shareholders to sell some of their shares and take some profit from their investment.
Esat shares have performed impressively since they were floated on NASDAQ and EASDAQ last November at $13 a share. Since then they have risen steadily and peaked at $38 earlier this month before weakening in recent weeks in line with the trend on Wall Street. Following yesterday's announcement, the shares fell and were trading over $3 lower on $311/2 as the Irish market closed. This fall yesterday largely reflects the dilution that the issue of the 1.3 million new shares will produce.
Mr Parkinson said that the group will be looking for a good spread of new investors in Ireland, Europe and North America, but added that Esat will not be taking an Irish stock market listing this year and gave no commitment to taking a listing next year either.
Mr Parkinson said that the rules of the Irish Stock Exchange on primary and secondary listings produce difficulties for Esat which would be required to take a primary rather than a secondary listing.
Stock Exchange rules for the secondary listing preferred by Esat include a provisions that the majority of the company's turnover is generated overseas, that it has a large overseas shareholding and that it has a listing on an approved overseas stock market.
Esat satisfies all these requirements except for the requirement that the bulk of turnover is generated overseas. As a domestic telecoms company, Esat's turnover is almost wholly derived from operations in Ireland.
