BUSINESSMAN DENIS O’Brien wrote to the chairman of Independent News & Media Brian Hillery on July 21st to demand that the company replace him and appoint a new chief executive in place of Gavin O’Reilly.
Mr O’Brien said “the very existence of IN&M is now under threat”.
He suggested the company should raise € 100 million in new equity and address debt maturities, and also called for a “slim-down” of its head office to a €4 million to €5 million cost base.
This is the latest twist in a long-running stand-off between Mr O’Brien, IN&M’s biggest shareholder with a 21.6 per cent stake, and the company and family of Sir Anthony O’Reilly, who own about 14 per cent of the business.
It is understood Mr Hillery responded to Mr O’Brien’s letter on July 25th.
“Let me say that IN&M is not under threat,” Mr Hillery stated in his letter. “IN&M is a very profitable company, well-capitalised and fully compliant with all its lending covenants.”
Mr Hillery added Mr O’Reilly had the support of the board and shareholders as chief executive.
Mr Hillery reminded Mr O’Brien he had voted in favour of his re-election as chairman and that of Mr O’Reilly to the board of IN&M at the company’s recent agm.
The pair had then met at Moran’s Red Cow Hotel in Dublin in early August.
Mr O’Brien is believed to have called for Leslie Buckley, his business associate, to be reinstated to the IN&M board. Mr Hillery is believed to have rebuffed this suggestion. Mr Buckley had been voted off the board by shareholders at the agm.
In relation to the position of chairman, it is understood Mr Hillery has indicated his willingness to stand down and that IN&M is currently seeking a replacement.
Mr O’Brien’s letter stated Mr O’Reilly did not have the “confidence of the market” as chief executive, “does not understand new media and has no strategic vision for the company”.
He was critical of Mr O’Reilly “basing himself in London”.
“We need both these new appointees to be based in Ireland, the market that still generates the majority of company earnings – in order that they can work with the other senior executives on a day-to-day basis,” he added.
Mr O’Brien was critical of IN&M’s share price performance, citing how the FTSE 350 Media Index had increased by more than 20 per cent in the past 12 months while the Irish media group’s share price had declined by over 50 per cent.
“Shareholder value in excess of €2 billion has been lost,” Mr O’Brien said. “It is time for radical change at IN&M,” he added. “Deleveraging is not a business strategy, and the market has given a resounding thumbs down to this strategy.”
Mr O’Brien outlined some “flawed decisions” in recent years.These included pursuing a dividend policy it “couldn’t afford”, paying out €98 million in 2008 – a year before debt default.
He said the company also implemented a “fruitless share buyback” that cost €140 million of “precious cash resources”.
An IN&M spokesman dismissed Mr O’Brien’s comments. He said Mr O’Reilly spends a considerable amount of time in Dublin, and also travels on company business.
He said many of the actions cited by Mr O’Brien had occurred before Mr O’Reilly became chief executive in 2009 and that the strategy being pursued was one that had been agreed by the board, which includes two nominees for Mr O’Brien – Paul Connolly and Lucy Gaffney.
