Analysis: Denis O'Brien's report on corporate governance in Independent News & Media (IN&M) lends more credence to the view that his ultimate plan is to mount a bid for the group. Circulation of the report to Irish and international media brings him into open conflict with Sir Anthony O'Reilly, chief executive of and dominant shareholder in the publisher of the Irish Independent.
Already the owner of an 8.35 per cent stake in IN&M, O'Brien's manoeuvres seem calculated to undermine Sir Anthony and weaken his grip on the business. A man who did not have designs on a bid would surely be more likely to stay quiet and take handsome dividends on his shares.
Sir Anthony commands more than 26 per cent of the business, but share buybacks in recent weeks and efforts to strengthen IN&M's rules on the disclosure of beneficial interests indicate that the group is taking the threat from O'Brien very seriously.
Indeed, some believe IN&M's failed attempt to buy out its Australian subsidiary APN was designed to free up cash for a possible delisting of IN&M itself. However, chief operating officer Gavin O'Reilly said less than a month ago that he does not foresee any change in IN&M's status as a public company.
That was before O'Brien started to turn the screw in earnest. The governance report follows news he has questioned the expenses IN&M pays Sir Anthony and will vote tomorrow against changes on its disclosure rules.
O'Brien has yet to say whether he will attend IN&M's annual meeting in Belfast. Either way, it can only be a matter of time before the skirmishing develops into a battle royale between knight and pretender. Neither money nor ego is in short supply on either side, so this could be a long-running spectacular.
The O'Brien report claims IN&M is increasingly at risk of being branded a "crony" company, raising for minority investors fear of a misalignment with the interests of Sir Anthony.
Without drawing comparison with IN&M, the report points out that the media industry "has a storied history or governance malfunction leading to abuse of minority investors by principal owners".
>While certain seasoned market observers are surprised that O'Brien has taken such an overt line of attack at this stage, IN&M says O'Brien's report as a whole is defamatory.
"In the absence of an apology, proceedings will be issued," said its spokesman.
O'Brien's spokesman said he "absolutely" rejected the defamation charge. "It is an excellent report which raises serious corporate governance issues . . . Answers rather than denials would be a more appropriate way to deal with these issues, he said.
"Denis O'Brien hopes that IN&M will avail of the opportunity to answer in detail all of the questions which they have refused to answer to date at the agm."
The O'Brien report says analyses by international governance experts cast "persuasive doubt" on the formal independence of every single non-executive IN&M director and says this unnecessarily undermines investors confidence in the group. It is already a given, however, that such concerns have surfaced in reports by international groups that review corporate governance.
Though questioned by IN&M, the real significance of O'Brien's highlighting of "governance malfunction" is that it marks the point at which his confrontation with Sir Anthony finally entered the public domain.
How and when the empire strikes back remains to be seen. In this battle, the fireworks are only just beginning.
