THE BOARD of Independent News Media (INM) is poised to spurn Denis O’Brien’s €100 million investment plan after he personally set out his terms to chief executive Gavin O’Reilly at a meeting between the rival camps vying for control of the company.
Amid deepening antagonism between the two men and their associates over rival plans to settle an overdue €200 million bond and refinance €1.1 billion in bank debt, Mr O’Brien flew in from New York early yesterday to present his plan to INM’s executive team at an engagement at the group’s headquarters at Citywest in Dublin.
Already the owner of a significant national and local radio business, he proposed taking 67 per cent of INM’s equity in a scheme that would dilute existing shareholders by as much as 92 per cent.
While he would halt the €98 million sale of South African advertising unit INM Outdoor, INM said last night that its banks and bondholders are consenting to the sale.
Mr O’Brien said he would close or dispose of the London Independent titles, but INM has argued that the cancellation of print contracts would cost €35 million.
Undertaking yesterday to examine Mr O’Brien’s proposal in parallel with its assessment of Mr O’Reilly’s plan, the INM board postponed until Monday its decision on the issue. Ahead of the meeting, a “standstill” with banks and bondholders was extended last night until October 30th.
Given that Mr O’Brien holds only three of the 10 seats on the board, the directors are widely expected to back Mr O’Reilly.
Although sources within INM’s banking syndicate said it was acknowledged that Mr O’Brien’s plan could work at a conceptual level, they said there was concern about the degree of “execution risk” in the proposal.
The syndicate – including AIB, Bank of Ireland and Ulster Bank – is said to have a preference for a solution involving Mr O’Brien and former chief Sir Anthony O’Reilly, a 28.5 per cent shareholder and father of the chief executive.
However, banking sources accepted that this would be very difficult to achieve in light of the acute breakdown in the relationship between the two camps.
The plan from Mr O’Brien, who owns 26 per cent of INM, is also being resisted by its bondholders, who would have to take a haircut of some €80 million on their €213 million liability. His plan would give them €40 million in cash and 25 per cent of INM’s equity. “The proposal is wholly unsatisfactory and grossly inferior to the alternative,” said a source close to the bondholder group.
The O’Reilly proposal would meet the entirety of the bondholders’ liability via receipt of asset disposal proceeds and a 46 per cent stake after a debt-for-equity swap.
Existing INM shareholders would be diluted by up to 75 per cent in the O’Reilly plan, but they could limit their dilution to 55 per cent by participating in a deeply discounted rights issue.
Mr O’Brien’s camp declined last night to comment on his plan, but it may require 75 per cent backing from shareholders to proceed.
Separately, a number of senior stockbroking sources questioned the extent to which the Irish Takeover Panel would grant a waiver to Mr O’Brien under which he could evade the requirement to mount a mandatory bid for INM once his stake exceeds 29.9 per cent.
Equally unclear is the stance of Tánaiste and Minister for Enterprise Mary Coughlan in relation to Mr O’Brien’s plan to take a controlling stake in INM. She is the ultimate regulator of media mergers.
