Singapore: GIC to acquire large minority stake in Irish telco Eir

GIC, the sovereign wealth fund (SWF) of Singapore, will be acquiring a large minority stake in Irish telecoms group Eir, with the transaction expected to value Eir, a former state monopoly provider, in excess of â‚¬3.3 billion euros. (Reported by DealStreetAsia.com)

In a development first reported by the Financial Times, which cited people familiar with the transaction, GIC’s investment in Eir is part of a series of transactions and corresponding ownership changes since the telecoms provider was privatised as Telecom Eireann in 1999. It operated under the brand of Eircom until a rebrand in September 2015 to Eir. The telecoms firm is the largest telecommunications operator in Ireland, with a division to service the business & corporate telecom markets in Northern Ireland and Britain.

Eir reported revenue for the year ended June 30 2015 at â‚¬1.3 billion and adjusted earnings were reported at â‚¬481 million. In 2012, Eir applied for examinership — which protects corporate assets from creditors for up to 100 days — following its default on corporate debts, with lenders of Eircom assuming control of Eir following a restructuring of its â‚¬4 billion of debt. This move reduced an estimated â‚¬1.7 billion of external borrowings from its balance sheet and restored a degree of financial health but also resulted in previous shareholders that included Temasek Holdings-backed Singapore Technologies Telemedia and more junior debt holders being evicted from their stakes in Eir.

This move saw the private equity (PE) major Blackstone Group become the largest shareholder following the bankruptcy protection plan. Subsequently, Blackstone exited via the sale of most of its stake to Anchorage Capital. At the time, Eir was considering a re-listing on the stock market, its hird flotation in 15 years. Currently, ownership rest with the following shareholders, all of which are US hedge funds: Anchorage Capital (38%), York Capital (15%), and Davidson Kempner (12%). Currently, the largest weakness of Eir, according to a February 2016 report by the Irish publication The Independent, is uncertain ownership.

The report observed: “Eir is generally regarded to have turned a corner on its crippled infrastructure days, with sizeable investments in new fibre roll-out and rebooted DSL broadband on the majority of its existing landline network.This has happened as it has cut its costs and returned to profitability. Its mobile arm, Meteor, is holding its own while its nascent TV service now has 45,000 customers.”

However, The Independent shared that “many analysts expecting it to seek an IPO whenever it thinks the market will allow it to,” with the transaction by GIC potentially being a pre-IPO financing round. At this point, the Irish telecoms space is highly competitive, with market share split between Eir, Vodafone, Virgin, Three and Sky. One the largest challenges to Eir in the meantime is the emergence of a new fibre network rivalling its current infrastructure, backed by Siro — a joint venture (JV) between Vodafone and energy services firm ESB, sees Eir’s long-term competitive advantage being eroded.