ANALYSIS:SIR ANTHONY O'Reilly's exit from the board of Independent News & Media heralds the end of an era in Irish commerce and the end of a remarkable career in which he ran the Heinz Corporation in the US for decades while pursuing numerous business interests at home.
Although the doughty expansion of Independent into markets as diverse as Australia, South Africa, India and Britain stands as his great entrepreneurial achievement, his departure comes at a time of exceptional instability for the business.
Under siege from “dissident” investor Denis O’Brien and under pressure from banks to resolve uncertainty around the refinancing of a €200 bond due in two months time, the company’s share price has plummeted in the past year to the point that they traded below 9 cent on Thursday in advance of the rivals’ decision to set aside their differences.
That Mr O’Brien has lost some €500 million on his investment in the company must come as cold comfort for Sir Anthony, whose own personal fortune has depleted by hundreds of millions of euro in the unyielding collapse of the company’s share price.
Only weeks after a receiver went into Waterford Wedgwood, a company he backed to the tune of €400 million with his brother-in-law Peter John Goulandris, these have been trying times indeed for man who might otherwise be enjoying the fruits of a long and illustrious career in the upper tier of the global marketplace.
For his son Gavin, elevated to the top seat after 16 years in the business, the prime task now is to engineer a recovery for a company under acute pressure from the combined and unforgiving forces of recession in its key markets and the credit crunch in the financial world.
Although this appointment ensures the continuation of the O’Reilly influence in the heart of the empire, Mr O’Brien is now very much in situ in the organisation. Undeterred by the forthcoming report of the Moriarty Tribunal or by his ownership of national radio stations Today FM and NewsTalk, Mr O’Brien’s influence on the business will be palpable.
Three of his top lieutenants – Leslie Buckley, Paul Connolly and Lucy Gaffney – will be a formidable force on the slimmed-down Independent board as it navigates the choppy waters ahead.
So what happens next? First up is that €200 million bond. Due in May and carrying a 5.75 per cent interest rate, the bond’s current coupon would be well nigh impossible to replicate in any refinancing package in the current market turmoil
Independent recognised as much months ago, seeking but failing to sell its 39.1 per cent stake in Sydney-based APN News & Media. A sale might have reduced Independent’s €1.4 billion debt to less than €600 million but no deal was possible.
The pressure on Independent’s share price since then has driven the stock down to levels that makes Mr O’Brien’s stake-building at up to €3.90 per share seem very dangerous for his financial wellbeing.
Independent is at present selling INM Outdoor, the South African outdoor advertising it used to co-own with US group Clear Channel. Also on the market are online utility price comparison business Verivox and online casino software firm Cashcade, businesses in which Independent respectively holds 49 per cent and 20 per cent.
While a likely requirement for bridging finance in anticipation of deals on these three fronts greatly strengthened the hand of Independent’s banks in their appeals for a public rapprochement between Sir Anthony and Mr O’Brien, the disposal of these assets will not be the end of looming change in Independent.
As Mr O'Brien's directors acquaint themselves with the inner workings of the business, it seems likely that management at the loss-making London Independenttitles and the loss-making Sunday Tribunein Dublin will be asked to develop proposals to quickly return those papers to the break-even point. The future of those titles will be in grave jeopardy if credible plans to do just that are not forthcoming.
A figure of considerable international renown, Sir Anthony must never have thought that his career would end like this. That his arch enemy is in the door at Independent will mark his legacy.
However, Mr O’Brien’s pursuit of the business is mark of Independent’s very strength. Albeit amid unbridled volatility in international and domestic markets, he leaves at a moment of severe vulnerability for the business. The two camps are not concert parties, but their alignment means they would be able to block any hostile takeover attempt from suitors seeking to take advantage of the company’s current weakness.
