Australians in little doubt on O’Brien control of INM

With distance comes a certain clarity and this seems to hold true on the vexed subject of who controls Independent News & Media, the largest media business in Ireland.

Businessman Denis O'Brien is the biggest shareholder, with a 29.9 per cent stake, and three of his close associates, Leslie Buckley, Lucy Gaffney and Paul Connolly, are on the 10-strong board. Buckley is chairman.

It’s a strong position but O’Brien tends to challenge any assertion that he controls the group. The reason is not modesty. It’s important in so far as that if he did control the group then his Irish media interests would be very large indeed – he also owns Today FM, Newstalk and several other radio stations – and even Ireland’s shambolic media regulation system might be spurred into action.

Instead of the clarity you might expect in a democracy over who controls some of the biggest-selling newspapers and popular news sites, we have the “constructive ambiguity” that we are well used to but outsiders find amusing and perplexing in equal measure

In Australia, however, O'Brien's control of INM seems unquestioned.

Last week, he increased its stake in INM’s Australian affiliate APN News and Media as part of a rights issue to fund the buyout of APN’s partners in its Australian radio stations.

As well as taking up the rights associated with his 1.3 per cent stake in APN – held by a company called Baycliffe Ltd – O'Brien also took up the rights associated with INM's stake of 28.95 per cent in APN. We are not privy to how this came about but what is clear was that INM, having just undergone a very tough restructuring, was not able to participate.

Viewed through Irish eyes, INM’s stake in APN has fallen to 18.61 per cent and O’Brien’s has risen from 1.89 per cent to 12.2 per cent and this is how the deal was reported here last week.

From the perspective of the Australian Stock Exchange, however, O'Brien controls 30.8 per cent of APN and, not only that, he controlled 30.8 per cent all along.

According to the statement issued by APN to the Australian Stock Exchange “The relevant interest of Baycliffe of 30.8 per cent in APN will therefore not change as a result of the entitlement offer.”

A relevant interest is defined by section 608 the Australian Corporations Act as the following:

“A person has a relevant interest in securities if they: (a) are the holder of the securities; or (b) have power to exercise, or control the exercise of, a right to vote attached to the securities; or (c) have power to dispose of, or control the exercise of a power to dispose of, the securities. It does not matter how remote the relevant interest is or how it arises. If two or more people can jointly exercise one of these powers, each of them is taken to have that power.”

Stake in APN
It's pretty clear that, as far as the Australians are concerned, O'Brien controls INM's stake in APN, which implies that they believe he controls INM.

Just in case there is any doubt, the point is spelt out by APN in a letter to the exchange in which it sets out the details of the placement. “Baycliffe Limited (a company controlled by Denis O’Brien) prior to the announcement of the entitlement offer had a relevant interest in approximately 30.84 per cent of APN’s shares (including a direct holding of 1.89 per cent and an indirect relevant interest in the APN shares held by INM).”

The clarity of the Australian position is in contrast to the rather muddled approach here. The debate seems to centre around what would happen if O’Brien’s stake in INM went over the 30 per cent threshold that would force him to make a bid for the whole company. Legislation that would make scrutiny of that process by the Competition Authority more robust and reflective of the public interest seems stuck in the wheels of Government.

But if the Australians are correct, we have rather missed the point and should be looking instead at control.