Business Opinion: Denis O'Brien's latest purchase of shares in Independent News & Media once again raises the enticing prospect of a titanic clash between the young pretender and the dominant figure in Irish corporate life for a generation, Sir Anthony O'Reilly, writes John McManus.
We have of course been here before, a little over a year ago to be precise, when O'Brien first swooped, picking up just over 3 per cent of the company for €56 million. Readers of this column will recall that we reached the not terribly difficult conclusion at the time that O'Brien's motives were a tad more sophisticated than merely rattling the cage of the man who bested him in the battle for Eircom. Beyond that, it is pretty much open season as to what O'Brien was up to.
One enthralling explanation is that O'Brien is laying the ground work for an attempt to force IN&M into play in a similar manner to the way that SeáDunne bounced Jurys Doyle into a take-private deal it neither wanted nor particularly needed. However, Dunne walked away with what he wanted - the Ballsbridge properties - although he paid a very full price.
Nothing about O'Brien's latest move is necessarily incompatible with this, but it chimes more resonantly with the notion that O'Brien is going to leave the heavy lifting to others and is really just reserving his seat at ringside.
O'Reilly, who is chief executive of IN&M as well as its largest shareholder, turned 70 last year and the succession issue is very much the elephant in the boardroom at IN&M.
One school of thought is that the issue may come to a head in the aftermath of the take private by IN&M of its Australian offshoot, APN. The buyout, which is being backed by Providence Equity Partners and the Carlyle Group, is widely seen as a done deal given IN&M's controlling position at APN.
It is also common case that the transaction will involve some sort of refinancing that will see a special dividend paid to the new owners. This in turn raises the spectre of some sort of special dividend at IN&M, which would produce a tidy lump sum for O'Reilly should he choose to sail off into the sunset. But if you buy into this scenario you are rather buying into the idea of O'Reilly voluntarily quitting a company he spent 33 years building up and letting his young rival in the door at the same time.
Not very likely.
However, by moving now, O'Brien has put himself closer to being a player in whatever unfolds at IN&M. And should nothing happen he will benefit from the fillip IN&M shares should receive should they either spend the money they get from the APN deal or give it back to shareholders.
It's all very interesting but in truth, however, all one can really say with anything approaching certainty is that O'Brien's stake-building, combined with the APN transaction, make it more rather than less likely that IN&M will itself become a buyout target.
Once the Australian deal is complete IN&M's balance sheet will be both cleaner and neater as a result of the decision to stop consolidating APN - which will be massively leveraged - into the IN&M accounts post the take-private. The geographically discrete and non-integrated nature of the global businesses that O'Reilly has assembled also make it suitable for breaking up.
O'Reilly is of course very well dug in, but as private equity has shown time and time again in the last few years, no one is safe when the cheque books come out.
O'Reilly's 28 per cent stake may be enough to block someone taking outright control, but he may not be able to stop somebody gaining more than 50 per cent. Indeed, the kingmakers in this regard are the big institutional investors, some of whom are clearly already selling to O'Brien.
Three in particular would appear to hold the balance of power - foremost among them is Bank of Ireland Asset Management, which holds just under 10 per cent. The other big investors, with about 5 per cent each, are Marathon and FMR. One suspects that if they have not had a call from O'Reilly recently, they will be getting one this week.
Should IN&M be put in play - and it falls into the could rather than will category - it raises the rather interesting issue of the largest media organisation in the country falling into the hands of private equity, and possibly foreigners to boot!
It is of course wonderfully hypocritical to talk of this in the same breath as IN&M, given its global footprint, but it is a serious issue, given the demonstrated power of the IN&M titles, most famously with the anti-Rainbow "payback time" stance it adopted in the 1997 election.
There is no bar on the foreign ownership of media assets here, but the Government has the final say on any merger or acquisition.
This affords O'Reilly some protection from international raiders, but leaves the field to O'Brien when, and if, he feels the time is right.
