IN&M pays too much for asset - O'Brien


Independent News & Media (IN&M) is paying €60 million too much for its latest acquisition and has run out of cash, major shareholder, Denis O'Brien, declared yesterday.

The company is buying the 50 per cent of African outdoor advertiser, Clear Channel Independent (CCI) that it does not own from multinational, Clear Channel, in return for 39 million new shares, worth €87 million at yesterday's closing price.

The news sparked a broadside from telecoms tycoon, Denis O'Brien, who owns 17 per cent of IN&M, and is critical of its chief executive and biggest shareholder, Sir Anthony O'Reilly.

"Independent News & Media has clearly used all its cash reserves and its borrowing capacity to buy its own shares and had no option but to issue more shares to fund this purchase," he said.

"The timing of the purchase could hardly be worse for all shareholders. The falling share price has meant that Independent News & Media has paid €86.6 million for something that would have cost €25 million a few months ago. The timing of this purchase has cost shareholders an extra €60 million."

Mr O'Brien's calculations are based on the fact that the company would have had to issue about 20 million shares for the CCI stake in mid-2007, when its share price was at a peak.

He added that despite a series of share buybacks completed by IN&M last year, its stock price had fallen dramatically.

The company responded by accusing Mr O'Brien of attempting to mislead other shareholders and the media. The group said it had "ample cash reserves and borrowing headroom".

It also argued that €25 million did not reflect CCI's value, as it was only three times earnings, while eight times was the norm for a business with its growth projections.

The deal gives IN&M 100 per cent of CCI, and results in Clear Channel taking 4.7 per cent of the Irish group.

IN&M said yesterday that CCI was set to increase earnings by 20 per cent this year, and would continue to grow at this rate in the build up to the World Cup in South Africa in 2010.

The move will also result in the 28.5 per cent holding controlled by Sir Anthony and his associates in IN&M being diluted to just over 27 per cent, while Mr O'Brien's 17.04 per cent holding will slip to 16.24 per cent.