Ihug staff share scheme still on, says Wood

Ihug's employee share scheme is still on track - but it may be months yet before staff see their Ihug Limited stock.

Ihug's employee share scheme is still on track - but it may be months yet before staff see their Ihug Limited stock.

The announcement of Ihug's proposed merger with the entertainment company Force Corporation this week made no mention of staff shareholdings - which were promised to staff as long as two years ago to offset salary sacrifices.

But Ihug managing director Nick Wood, who is set to become CEO of the Internet side of the new Ihug, says the scheme hasn't been forgotten.

"It's something we'll have to work on over the next few months I guess. The shares have been put aside, so it just depends on what the implementation of it is going to be."

The exact mechanism has yet to be worked out and Wood won't say how many shares are involved, but says staff will get "what they were promised - we'll live up to their expectations of us."

Since the deal was announced on Tuesday there has been some disquiet at apparent insider trading in Force shares last week - prompting Force to issue a "don't sell" notice to its shareholders last Thursday - and the sale of 10% of Ihug to Tappenden Holdings on the same day as the Force deal was fixed, giving Tappenden 6% of the new company. Tappenden acquired its shares in the new company at an assumed price of 57 cents on Tuesday; shares in Force Corporation reached 85 cents on Wednesday and closed yesterday at 84 cents.

Tappenden is the investment company of Alan Gibbs and Sky TV board member Trevor Farmer, who are understood to have driven last year's ultimately unsuccessful proposal for Sky to buy 30% of Ihug for about $30 million.

Wood says the Tappenden sale "was something we've been working on for a long time, that was going to happen anyway. Tappenden have been our mates for a year and we were in the process of doing that when the [Force] option came up.

"We still wanted them involved in the company - their business nous is a valued asset from our point of view - so we just completed that transaction as well. Obviously it also provided some cash for the business."

If Tappenden bought its share of Ihug based on the same value as that assumed in the Force proposal, it will have put $12 million into the business. The deal with Force - effectively a reverse takeover by Ihug, whose interests will have 51% of the new company, not counting Tappenden's stake - is stock-only. Force shareholders will be asked to approve the merger at a meeting on April 1

Further cash is to be raised by the sale of Force's property assets , chiefly the Force Entertainment centre in Queen Street and its Mt Wellington retail development. Wood says he has no idea what the company might raise from the property sales: "It's not my side of the business - that's the Force guys."

He does know where the money will go, however:

"Primarily this year we'll be focusing on growing our customer base, and continuing on with the digital TV project. Those two will be our main focus."

Salaries for Nick and Tim Wood in the proposed new company have not yet been discussed. Remuneration became a controversial issue in the course of the Sky deal, when someone on Sky's side of the negotiations apparently leaked a document indicating that the two brothers who founded the company were demanding salaries up to $500,000.

"I don't know why it was controversial," says Wood. "It's a high-tech industry and I don't think those salaries were very controversial at all. It's not a major issue for any of us. If we're going to work 50 or 60 hours a week the other shareholders will have to pay us something to do it and we'll work out what that's going to be."

Tim Wood says he has "never asked for and never been paid" $500,000 a year.

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