The big question is: who will the other shareholders support?

IT’S war – the phoney peace has ended – Denis O’Brien has the O’Reillys in his sights and this time there will be blood on the floor.

In a dawn raid yesterday, Independent News & Media’s (INM) second largest shareholder Denis O’Brien (209,898,972 shares – 25%) ended the détente which had survived for almost six months by outlining eight highly controversial resolutions he wants shareholders to vote on at a specially convened emergency meeting.

O’Brien held nothing back; this time it appears to be personal too. Ostensibly his main target is INM chairman Brian Hillery, holder of 50,419 INM shares – 0.01%, who he wants shareholders to fire. Mr Hillery is a big target; he is on the board of the Central Bank.

O’Brien also wants to stop the company paying INM’s largest shareholder, Anthony O’Reilly (235,141,030 shares – 28.01%) an honorarium of €300,000 for being president emeritus.

However, his real target has to be Tony O’Reilly’s son – INM chief executive Gavin O’Reilly (1,044,824 shares – 0.12%). The younger O’Reilly’s determination to plough ahead with the sale of INM’s South African outdoor advertising business to net €97 million is in direct contravention of an edict handed down by O’Brien that this business should not be sold-off.

If O’Brien gets the backing of an EGM on this or any other point then O’Reilly’s role as an executive at INM is untenable. If O’Brien fails he will have no choice other than to allow the current management get on with the business of running the company as they see fit.

The big question is, who will the other shareholders support? Tony O’Reilly and the board control close to 30% directly and can expect to get the support of fourth biggest shareholder Clean Channel International (25,187,877 shares – 2.79%). Third biggest shareholder marathon Asset Management (41,979,794 shares – 5%), and fifth biggest Bank of Ireland Asset Management (23,398,052 shares – 2.79%) will vote to secure their investments. And it is anyone’s guess which arguments they will buy.

The O’Reilly faction say they need an orderly disposal of non-core assets to raise cash to enable a deal with bond holders who hold €200m of the company’s €1.4bn debt through a yet-again extended deadline of September 25.

The O’Brien faction say more radical surgery is required and a sell-off of the lost making prestige London based Independent titles among other stratagems is required. All sides know it could end in the company being put into examinership.

O’Brien should be a bidder for the company’s assets in an examinership situation but other potential investors with far deeper pockets, News International for one, could see him off.

The vast bulk of the company’s shareholders have holdings of less that 0.2% and it is these who will have to be convinced, one by one, if the O’Reilly path or the O’Brien strategy is the best one to follow. It is hard to imagine Gavin O’Reilly called O’Brien’s bluff on the sell-off of the African outdoor assets without knowing he had his shareholder ducks in a row.

In reality INM management have to win all eight votes to secure victory; O’Brien needs just a few to be declared the winner.

This will be the shoot out at the OK Corral of Irish business. Students of history will know that while one faction won in Tombstone on that fateful October 26, 1881, all parties suffered irreparable damage.


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