BUSINESSMAN DENIS O’Brien said he was “at this time” against the appointment of an examiner to Independent New Media plc in a letter to the company secretary on August 30th last.
In the course of the eight-page letter, he strongly criticised the performance of the INM management and board and said he did not believe the company’s chief executive, Gavin O’Reilly, was capable of putting together a restructuring of the plc.
“It is clear that the seven remaining O’Reilly legacy directors have been party to a whole series of bad decisions and have failed all stakeholders. The equity value of the company has collapsed from €3 billion to €200 million in less than two years and these directors have presided over this collapse.”
A copy of the letter has come into the possession of The Irish Times. In it Mr O’Brien said that the INM bankers and bond holders “highlight three areas that they believe the board has failed them on”. He then listed the failure to refinance a €200 million bond in time, the use of “valuable cash of almost €140 million” in a share buyback programme, and the payment of dividends of €98 million in 2008.
“In addition, they fault the board on grasping the seriousness of the situation earlier and also how it has dealt with the evident problem since last summer of last year. They also highlight the board’s handling of failed remedies to solving the problem.”
He wrote about the standstill agreements that have been negotiated with the company’s bondholders and banks. “To the extent a deal is not struck between the various parties by September 25th, it must be in serious doubt as to whether agreement to enter a fifth such arrangement will be forthcoming or indeed, without a significant change in approach, if a consensual deal will be agreed. At this time I am against the appointment of an examiner and I would only advocate to the board to consider examinership as an absolute last resort to extricate the company from this situation. The company remains at a perilous financial crossroads and throughout this period all stakeholders have endured continuing deterioration in value.”
Mr O’Brien complained about the responses received to approaches on his behalf to the senior independent director on the board, Baroness Margaret Jay, and to the chairman, Brian Hillary.
He wrote that at board level there was no culture of demanding action where overall business or individual business units missed their budgets.
“Shortcomings are met with a shrug of the shoulders and an acknowledgement that market conditions are indeed tough out there. These are all symptoms of a board with ‘no skin in the game’ who have presided over a steady erosion of stakeholder value and defaulted on bond payment terms.” He said it appeared it was only his board appointees who were concerned about current company performance and future trading prospects. Mr O’Brien wrote that efforts by him to effect change have not been successful. Efforts by board members appointed by him “have been constantly thwarted and obstructed at every turn by the existing management and other board members. Any effort to revitalise and bring about change in this company has been met with at the least, suspicion, and at the most, outright resistance.
“I have concluded that it is now imperative, therefore, that, as a significant shareholder, I take action directly to address the serious concerns relating to the company’s corporate governance and to seek to avoid further destruction of stakeholder value. Accordingly, as set out below, I seek to requisition a general meeting of INM.”
He included in the letter eight resolutions he wanted put to the requested meeting. Mr O’Brien has in recent years built up a 26 per cent stake in INM, the value of which has fallen by hundreds of millions of euro since it was accumulated. Sir Anthony O’Reilly and his family have a 29 per cent stake.
