How the O'Reillys lost battle for INM
Events in the Four Courts this week lifted the lid on the bitter divisions within the boardroom of Independent News Media, publisher of large circulation titles such as the Sunday Independent and the Irish Independent.
And today’s annual meeting in the Citywest Hotel in Dublin could yield further revelations.
Non-executive director Paul Connolly has taken an action in the Commercial Court to have a €1.87 million exit package paid on April 19th to former chief executive Gavin O’Reilly declared unlawful.
Connolly argues the compensation, which amounts to 23 months of remuneration for O’Reilly, was excessive and should have been voted on by shareholders as per company law.
INM disagrees, with chairman James Osborne countering that the payment to O’Reilly avoided potential litigation from the executive and all of the associated legal costs and negative publicity that would have attached to such a move.
Legal advice to INM from McCann FitzGerald suggested the O’Reilly’s package did not require shareholder approval.
Documents filed in relation to the case highlight the many divisions at board level within the company and the roles played in O’Reilly’s demise by its largest shareholders and its lenders, particularly Bank of Ireland.
Osborne took over as chairman in October 2011. He succeeded Brian Hillery, someone the O’Brien side had wanted removed from the post for some time as he was considered too close to the O’Reillys.
Osborne’s appointment came just months after a bitter annual meeting that saw non-executive director Leslie Buckley removed from the board by shareholders.
Buckley had been one of three O’Brien representatives on the board of INM following a restructuring of the board in 2009. As far as the O’Brien side was concerned, Buckley’s removal was orchestrated by the O’Reillys.
Wealthy financier Dermot Desmond joined the O’Brien side in supporting Buckley at the annual meeting.
Rarely in the history of Irish public companies has a non-executive been removed from the board. This act served to strengthen O’Brien’s resolve to remove Gavin O’Reilly from his post and take control of the board.
Osborne’s role over the past eight months or so has been pivotal in all this.
This is not to suggest that he has been a patsy for O’Brien. Quite the opposite.
Osborne took his role as an independent chairman very seriously and earlier this year set about tackling the bubbling discontent with the performance of Gavin O’Reilly.
This involved a serious of meetings with key stakeholders, including O’Brien, Desmond and Bank of Ireland. On March 8th, Osborne made a note of a meeting with O’Brien.
“I explained to D O’Brien that there was no question of him gaining control of INM unless he were to make a successful bid. He said he had no intention of doing this as he had lost €500 million-plus on his investment.”
O’Brien also expressed his concerns about existing management, but “didn’t say anything new”, according to Osborne’s note.
On March 12th, Osborne made a note of a meeting with Desmond, who said he had admired Sir Anthony O’Reilly but felt Gavin O’Reilly was “useless”.
Desmond, who owned 5.75 per cent of INM at this time, told Osborne he would oppose the re-election of the whole board at the annual meeting, before stating that he would definitely vote against O’Reilly and finance director Donal Buggy.
Desmond said he would not support a rights issue with the existing management team in place.
The following day, Osborne made a note of a phone call with Pat Gaynor of Bank of Ireland. “The over-riding view of the bank was that substantial changes to management were required,” Osborne noted. “He said the bank would not officially say this, but that he was authorised to convey this message to me.”
March was to prove a pivotal month for O’Reilly in relation to INM. On March 6th, Osborne sent him a strongly worded three-page letter outlining his concerns about O’Reilly stewardship of the company.