INVESTMENT
Vodafone buys Eircell for EUR4.5 billion
21-12-2000
by Aoidin Scully
Eircom said on Thursday that it had completed the EUR4.5 billion sale of Eircell to Vodafone, and that it had rejected the eIsland bid for its fixed line business.
The long-awaited sale was for EUR600 million less than was initially anticipated but includes the assumption of EUR250 million of debt.
The acquisition means that Eircell will now become Eircell 2000 plc, and Eircom shareholders will receive one Eircell 2000 share for every Eircom share held.
The offer of 0.9478 Vodafone shares for every two Eircell 2000 shares values Eircell 2000 at approximately EUR4.2 billion. Vodafone will issue approximately 1.046 billion new Vodafone shares to Eircell 2000 shareholders. The total transaction value of EUR4.5 billion is based on Vodafone's closing share price on 20 December 2000 of STG2.45.
The sale is expected to be completed in the first half of 2001, but is conditional on the acceptance of the deal by Eircom shareholders. Irrevocable undertakings to vote in favour of the Offer have been received from Comsource (owned by KPN Telecom B.V. and Telia AB) and those Eircom directors who will hold Eircell 2000 shares, representing approximately 35 percent of the Eircell 2000 shares to be issued.
"This transaction will result in a substantial release of value to our shareholders who are now benefiting from the development of Eircell," insisted Alfie Kane, Chief Executive of Eircom, in a statement. "The combination of Eircell with Vodafone's global footprint will enhance Eircell's ability to meet its longer-term strategic challenges."
The acquisition marks the latest step in an expansionist year for the UK-based mobile giant.
"Vodafone are defining the new rules of the game," commented Paul Phelan, an analyst with Davy Stockbrokers. "They're very aggressive and they're effectively leading this consolidation in the telecoms industry, particularly from a wireless point of view." He added that, with the advent of third-generation mobile telephony, it's perceived that telecoms need to be global operators with the economies of scale that will come from that to compete."
The announcement would be welcomed by shareholders, said Scott Rankin, also of Davy, who commented that Eircom management is under pressure to deliver shareholder value and that Eircell didn't have a future as an independent entity.
"However," he warned, "Eircom still have a fixed line and multimedia business which needs to be sorted out. They've to decide what their strategy is going to be going forward."
Eircom also issued a statement rejecting Denis O'Brien's eIsland consortium bid for its fixed line businesses. The company said simply that eIsland's EUR2.25 billion offer "undervalued the fixed line business."
Vodafone also acquired a 15 percent equity stake in Japan Telecom this week at a cost of STG1.5 billion. The investment boosts its ownership in the country's third-largest wireless operator J-Phone to 34 percent from a 26 percent stake now, as Japan Telecom owns 54 percent of that company. The deal makes Vodafone the third major foreign shareholder in Japan Telecom, alongside BT and AT&T.
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