O'Brien's endgame: Take control of Independent News & Media

What a mess.

Denis O’Brien has demanded an extraordinary general meeting of shareholders at Independent News & Media. He wants the company to shut or sell The Independent and The Independent On Sunday.

The renewed demand — a formal one this time — seems to have been prompted by INM’s decision to sell its South African outdoor advertising business (which O’Brien wants the company to retain).

INM has 21 days to respond formally to O’Brien’s request for an EGM. And it has 23 days left before the next deadline for resolving its €200m bond default heaves into view (on 25th September).

Presumably, those negotiations can’t reach a conclusion while open warfare exists inside the boardroom.

And so the clock keeps ticking. Last week, INM’s interim financials revealed that these interminable debt renegotiations have cost the company €8.6m so far in professional fees.

Working on the assumption that O’Brien has increasingly become the main obstacle to a deal, there’s an irony in this.

INM’s UK operations — which include the Independent and the Belfast Telegraph –- lost €3.8m between January and June. Gavin O’Reilly, INM’s chief executive, believes that the Independent could breakeven by 2010.

Rather than going to line the pockets of INM’s advisors and lawyers, wouldn’t INM’s €8.6m would have been better spent shoring up the Independent through the worst of the recession?

Of course, this hardly matters if the Irish Times is correct about O’Brien’s ultimate aim: to push INM toward examinership (administration) before buying the company outright.

INM appears to hint at this ulterior motive in its response to O’Brien’s EGM demand. (”It is difficult to see how Mr. O’Brien’s actions assist in the resolution of the financial restructuring, which the board believes is in the best interests of the company and its stakeholders.”)

Reuters, too, has picked up the same whiff of ambition on O’Brien’s part. Its story quotes an unnamed Dublin stock analyst as follows:

“I think he [O’Brien] still has an interest in being a controlling investor at day one of a new Independent but it is a question of the damage beforehand. Open warfare is not helpful.

For several reasons, the suggestion that O’Brien wants control strikes a chord. Why else reopen hostilities when O’Brien has already seen off his nemesis, Sir Anthony O’Reilly? Why do it at a point when Gavin O’Reilly appears to have a viable plan for reversing INM out of its plight that the banks find acceptable?

For no other reason, I suspect, than the fact that O’Brien sees himself as a suitable dynastic successor to O’Reilly Snr. More pointedly, corruption allegations give O’Brien an incentive to get close to the means of influencing public opinion in the Republic (if not the UK).

At the Guardian, Richard Wray suspects that O’Brien might even get his way, forcing the sale of the Independent. If this occurs, it’s hard to see how INM’s management team — including Gavin O’Reilly — could continue to run the company. After such a vote of no confidence, all bets would be off.

Of course, if O’Brien does intend to take control of INM, he will need to placate more than the company’s shareholders.

As Vincent Browne points out at the Irish Times, O’Brien already owns a fair swathe of the Irish Republic’s media (mostly in the form of radio stations). Adding to his empire would pose a grievous headache for anti-competition authorities.

I doubt whether Denis O’Brien will ever run for public office. But the remaining facets of this story — corruption probes and concentrated media ownership — add up to something familiar. In Denis O’Brien, the Irish Republic could soon find itself giving birth to its very own version of Silvio Berlusconi.

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