Billionaire Li Ka-shing’s Hutchison Whampoa Ltd. (13) made a bid of about 2 billion euros ($2.6 billion) for Eircom Group, the Irish phone company in supervised credit protection, people with knowledge of the matter said.
The cash offer by Hutchison’s Three Ireland unit was rejected by the country’s court-appointed examiner because there were too many conditions attached, said two of the people, who declined to be identified because the discussions are private. Three Ireland is working on a revised bid, they said.
Eircom filed for the Irish equivalent of bankruptcy protection on March 30 with 3.8 billion euros of net debt, the biggest corporate insolvency in the nation’s history. Hutchison is stepping up its investments in Europe, where the Hong Kong company agreed to buy wireless carrier Orange Austria this year, and acquired the U.K.’s Northumbrian Water Group Plc in 2011.
“Eircom is undergoing restructuring, so the company may be purchased at a discounted price,” said Lam Ka Kei, who rates Hutchison buy at Redford Asset Management Ltd. in Hong Kong. “For Hutchison, price is the all-important thing in any deal. There are many companies in Europe that face financial issues, so there are opportunities for Hutchison.”
Goldman Sachs Group Inc. is advising Hutchison, two people said. Morgan Stanley is Eircom’s adviser.
Laura Cheung, a spokeswoman for Hutchison in Hong Kong, declined to comment, as did representatives for Eircom and its senior lenders, Three Ireland and Goldman Sachs.
May 7 Deadline
Eircom’s examiner last month set an April 23 deadline for indicative investment proposals, with a May 7 deadline for final proposals.
Dublin-based Eircom, Ireland’s biggest fixed-line operator, said April 30 the examiner, Michael McAteer of Grant Thornton, rejected a conditional non-binding offer for the company. It didn’t name the bidder. “No new offer has been received by the examiner,” McAteer said by phone today.
Eircom customers have cut spending or ditched their contracts as unemployment tripled with the economic collapse that led Ireland to seek a bailout in 2010.
Eircom Ltd., Eircom’s main trading company, reported a 4 percent decline in earnings before interest, taxes, depreciation and amortization for its 2010/2011 financial year to 647 million euros. Sales fell 8 percent to 1.69 billion euros.
Hutchison has said it’s looking to expand its wireless business in Europe. There are opportunities for consolidation in the phone industry in the region, Managing Director Canning Fok told reporters in Hong Kong on March 29.
“We will be the consolidator; we won’t be consolidated,” he said at the time.
In February, Hutchison agreed to buy Orange Austria in a deal valued at 1.3 billion euros to expand its operations in the Alpine country. That transaction is under scrutiny by European regulators.
In Italy, Hutchison held discussions last year over a sale its Three unit to Telecom Italia SpA (TIT), but the talks didn’t result in a deal, people with knowledge of the matter said.
Hutchison’s 3 Group, which owns phone businesses in Italy, the U.K., Denmark, Sweden, Austria, Australia and Ireland, has made cumulative investments of HK$240 billion ($31 billion), according to an estimate by Morgan Stanley in 2010.
At of March 28, 3 Group had 28.9 million customers, with about 60 percent of them in Italy and the U.K. Three Ireland had about 843,000 clients.