Eircell sale, Includes €250m debt
Eircom has signed an agreement with UK mobile phone company, Vodafone, for the sale of its Eircell unit at a price of €4.5bn. Under the deal, each Eircom shareholder would receive Vodafone shares worth €1.91. The total price of €4.5bn includes debt of €250m. The price will not be paid in cash but each Eircom shareholder will get almost one Vodafone share (0.95) for every two Eircom shares they hold. At yesterday's closing price, these Vodafone shares are worth €1.91 per share.
Some analysts have expressed disappointment at the price, pointing out that it is at the lower end of expectations. Only two months ago, a price of €2.30 had been mooted. However, on the plus side, Vodafone shares have slid substantially since the talks were first announced so there may be potential for an increase over the coming months. Eircom shareholders will get the benefit of any rise over yesterday's closing price.
Given today's figures, there is little chance of shareholders recouping their original €3.90 per share investment in Eircom. A Denis O'Brien led consortium has offered €1.00 per share for Eircom's fixed line assets while the remaining business is worth €0.30 per share. This brings the total to €3.21, showing shareholders will still have a shortfall of almost €0.70. Eircom issued a formal statement today rejecting the Denis O'Brien bid as too low. Negotiations on that deal are now expected to begin in earnest.
