The High Court has dismissed an attempt by Hutchison Whampoa to block the restructure of struggling telco Eircom on the grounds that the Hong Kong conglomerate’s €2bn bid to buy the company was not properly given consideration by the Examiner.
The move ends a bid by one of the world’s biggest companies with significant financial resources to buy Eircom which is struggling under a €3.7bn mountain of debt and instead paves the way to give control over to senior debt holders who are owed €2.7bn.
On Tuesday Hutchison Whampoa, which employs 230,000 people worldwide and owns mobile operator Three Ireland, applied to the High Court jointly with DW Investment LP, a junior creditor.
In a ruling today the High Court dismissed the application in favour of the senior debt holders.
Last week Eircom’s Examiner Michael McAteer of Grant Thornton declined a second €2bn cash offer by Hutchison Whampoa, the Hong Kong-headquartered conglomerate headed by Li-Ka Shing that employs 230,000 people in 54 countries.
The new offer included a €50m cash offer to creditors who are likely to be wiped out if a deal between Eircom’s Examiner and senior lenders goes ahead. The second offer also saw the "conditionalities" removed except for due diligence.
In a statement Three Ireland communications director Rachel Channing said that Hutchison Whampoa is disappointed with the court’s decision.
“We sought direction from the court in order that our offer for Eircom was given due consideration," she said.
“Three believes its offer was best for Eircom, its stakeholders and Ireland Inc. Three’s parent company, Hutchison Whampoa Limited (HWL), an experienced telecommunications operator, had committed to provide the stability and ongoing investment that is necessary for the Eircom business to recover.
“We are disappointed with today’s outcome however we respect the court’s decision and it is business as usual at Three, offering Irish consumers great value for money on Ireland’s fastest high speed network."
So what’s next for Eircom?
By rights Eircom should be the jewel in Ireland’s infrastructural crown.
However, when Ireland needs a strong, robust telecoms player as the digital economy kicks into gear we find an incumbent operator that is €3.7bn in debt and about to enter into the hands of its eighth set of owners in 13 years.
You could argue that Eircom’s misfortunes began in 1999 when the company went for an IPO. At that time it was debt-free and employed 12,000 people.
Today the company employs 5,000 people, owes a lot of money and is in the midst of a complicated restructure.
The company’s management say that following this process it will somehow pump €400m into a plan to connect more than 1m premises in Ireland to fibre broadband infrastructure within three to four years.
To an incredulous public, turning away a buyer with deep pockets to invest in fibre infrastructure and secure employment for its workers seems either foolhardy or suspicious. No one in Ireland has the appetite, time or patience for yet another perceived asset-stripping exercise. The economy needs certainty.
It will be important in the coming days for Eircom and its senior debt holders to communicate very clearly where this €400m will come from and how and when it will happen.