Deal of the Month January 2018: a milestone deal for eir

Pictured: Xavier Niel.

The purchase of a majority stake in eir was the deal everyone was talking about as we entered 2018.

In late December it was announced that a consortium led by French telecoms billionaire Xavier Niel would purchase a majority stake in eir. Carl Leaver, chairman of eir described the deal as a “milestone for eir, our customers and indeed for Ireland itself”.

Under the terms of the deal Niel’s company NJJ Telecom Europe will own 32.9% of eir, and another French telecommunications company Iliad will own 31.6%. Xavier Niel owns 52% of Iliad. The transaction values eir at about €3.5bn including debt.

Iliad has an option to buy 80% of NJJ’s stake in 2024, giving it a further 26.3% of the company. Until then Iliad’s involvement is limited to the board of directors, while NJJ will have control over the management of eir.

Nicolas Didio, a senior telecoms analyst at Berenberg in London said, “The surprise is to see Iliad involved in the deal structure.” He predicted Iliad would ultimately take full control of the asset but at this point in time a full acquisition of eir by Iliad alone would have compelled the telecoms operator to consolidate eir’s net debt of €2.1bn, which would tie down too much of their balance sheet at a time when their capital expenditure in France is high and their business is launching in Italy.

eir is owned by an investor group including Anchorage Capital Group, LLC Davidson Kempner Capital Management, Singaporean sovereign wealth fund GIC and management. Shareholders Anchorage Capital Group and Davidson Kempner will retain a combined 35.5% share in the company, respectively 26.6% and 8.9%. GIC is selling its shareholding. It was reported that some 45 senior management staff in eir will share a pot of €100 million in exchange for their shares.

The former state telecoms company has been in a state of flux since 1999 with 10 changes to its ownership structures, moving back and forth through IPOs and returns to private ownership, and rising phoenix-like from the ashes of examinership in 2012, through an extensive rebrand from eircom to eir in 2015.

Speaking about the deal Mr Niel said, “We are a long-term investor in the telecoms sector and bring global knowhow to eir. In our businesses in France, Monaco and Switzerland we have consistently delivered investment in infrastructure, while driving down prices for consumers.

“We want to invest for the future of Ireland and hope to work closely with the Irish Government and ComReg to ensure that people across the country have access to world-class super-fast fixed and mobile broadband,” he added.

Subject to EU Commission Competition clearance, the deal is expected to complete in the first half of 2018, at which point current CEO Richard Moat has indicated he will step down. Birmingham-born, Cambridge-educated Moat has led the company for the last three years.