Major shareholder in troubled Smart Telecom Brendan Murtagh has acquired the business, assets and liabilities of the company for €1. Smart will delist from London’s AIM market and a new company controlled by Murtagh called BidCo will assume all the liabilities of Smart, estimated to be almost €40m.
Under the transaction, Smart will dispose of all of its business, assets and liabilities to BidCo for €1 together with shares representing 10pc of BidCo.
Murtagh holds 75,989,500 Ordinary Shares, representing 19.99pc of Smart’s issued share capital. BidCo will assume all the liabilities of Smart, which are currently estimated to amount to nearly €40m. Smart will be issued with a 10pc interest in BidCo as part of the transaction.
“It is the directors’ intention to retain this stake for the benefit of the shareholders,” said Smart Telecom in a statement.
The disposal will need to gain the approval of shareholders at a forthcoming Extraordinary General Meeting. It is understood that BidCo has already received irrevocables from shareholders representing 31pc of the shares to vote in favour of the transaction and undertakings from a further 11.5pc, together totalling 42.1pc.
The company said that the new Smart, supported by new investment, will continue its strategy of delivering voice and broadband services to its Irish residential and business customer.
Acting CEO Ciaran Casey commented: “While this represents a very disappointing outcome for all shareholders who have supported the company over many years, it is the only option to ensure that shareholders have an opportunity to get some value for their shareholding.
“The proposal put forward by BidCo will allow Smart to deal responsibly with all its creditors in due course and ensure that a newly capitalised Smart will continue to deliver to its many customers the most competitive corporate and broadband offering in the market.”
Casey went on: “At this time, I would like to acknowledge the enormous amount of goodwill, support and patience received from our customers throughout this difficult period for Smart and also the ongoing support of both creditors and employees.
“I believe that with this new investment we can now look forward to continuing to lead on behalf of the Irish residential and business consumer the drive for value and leading-edge technology in the Irish broadband market.”
The company said that over the last number of days, Smart’s board, advised by NCB Stockbrokers and BDO Simpson Xavier, worked to consider all available funding alternatives to allow the company to continue as a going concern. “Unfortunately, given the financial and operating position of the company, it was not possible to secure new equity funding,” a statement read.
The interim results released on 22 September 2006 set out clearly the financial position of the company and since then the company has only been able to continue trading through Murtagh’s financial support.
As a condition of the disposal and the interim funding, Ken Barry, Ray King, Paul Sullivan, Maria Pearl Roche and Tormod Hermansen will resign from the noard immediately. Kyran O’Dwyer has been appointed acting chairman until the transaction is voted on by the shareholders.
The difficulties that Smart Telecom found itself in came to light earlier this week when Eircom switched off some 45,000 Smart Telecom voice telephony customers and began the process of disconnecting its 16,000 broadband customers.
The decision by Eircom was made over some €4m worth of debt that Smart has not paid Eircom.
Smart Telecom is understood to have ratcheted up bills of over €36m trying to market its services to Irish users. However, the company failed to bring in sufficient business to match this expenditure.
It emerged that the company’s investors have been spending €3m a month to keep the company afloat.
In recent weeks founder and CEO Oisin Fanning stepped down from the company while the company decided to reduce its headcount from 450 workers to only 100 employees.
By John Kennedy