Private shareholders are shown the door at mmO₂

More than 1 million private investors in mmO ₂ are being encouraged by the mobile phone operator to sell their holdings as part of one of the biggest recent corporate makeovers.

More than 1 million private investors in mmO ₂ are being encouraged by the mobile phone operator to sell their holdings as part of one of the biggest recent corporate makeovers.

The company is offering private shareholders the chance to cash in their shares at the market price plus a 5p premium to try to persuade them to sell up.

Peter Erskine, the chief executive, is revamping its corporate structure and shareholder base before paying a maiden dividend - expected in August -likely to be worth about 2p a share.

However, the cost of sending out dividend cheques to the 1.04 million shareholders who own between 1 and 600 shares is expected to exceed the value of their payouts in many cases, so the company is attempting to focus its share register on larger, more cost-effective shareholders.

The restructuring will result in the company changing its corporate name to its more familiar O ₂ brand name.

In another cost-related move, mmO ₂ has become the latest UK company to scrap its US stock market listing, and plans to end its registration with the Securities and Exchange Commission. It has a tiny number of US resident shareholders and trading in its US listed securities is negligible, making a stock market presence there an unnecessary cost, particularly as the burden of regulation rises with the advent of the Sarbanes-Oxley Act, passed after the Enron collapse.

The large US institutions keen to invest in the company now do so by buying shares directly on the London Stock Exchange through their UK-based fund management subsidiaries.

Other British companies axing US listings include the media groups ITV and UBM.

The restructuring of mmO ₂ is necessary because the corporate form it inherited when it was demerged from BT Group in 2001 did not include the legal ability to distribute profits as dividends.

MmO ₂'s 1.04 million private shareholders represent 63 per cent of its shareholders by number but only 3.5 per cent of its issued share capital.

In a statement, the company said yesterday: "The cost of servicing such a large number of shareholders is significant. In many cases it is likely to cost mmO ₂ more to send dividend cheques to its small shareholders than the amount of the dividend they are receiving."

As part of the restructuring all shareholders will be offered the chance to swap their shares in mmO ₂ for the same number in the new O ₂ plc. However, they will also have the option of electing to take cash. Shareholders who take no action will be deemed to have chosen the cash option with its 5p-a-share premium.

"This cash consideration will consist of the amount received through a placing in the market of the new shares to which shareholders would otherwise be entitled, plus a premium of 5p a share financed by mmO ₂," the company said.

The size of the cash alternative is expected to be limited to about 300 million mmO ₂ shares.