O’Reilly’s stake in INM reduced to 7 per cent

Shareholders in Independent News & Media (INM) have approved the group's €43 million capital raising at a meeting of shareholders in Dublin, in a move described by INM chief executive Vincent Crowley as "a key step" to ensuring the group's future.

However, Mr Crowley signalled after the company’s egm that there would be further job cuts at the group next year, while chairman Leslie Buckley told shareholders he could not “make any Christmas promises” on when it could pay dividends.

INM's biggest shareholder, Denis O'Brien, and major shareholder Dermot Desmond, have committed to buying shares in the capital raise to the tune of an aggregate €29.6 million. Mr O'Brien's participation in the exercise has been constructed so that he maintains his share in the company at 29.9 per cent, while Mr Desmond's interest will increase from 6.4 per cent to 15 per cent, meaning he becomes INM's second-largest shareholder.

The approved capital raise consists of two elements: a firm placing, through which INM will raise € 30.2 million through the issue of 430.8 million new ordinary shares to Mr O’Brien, Mr Desmond and certain institutional investors; and, secondly, an open offer, through which it will raise approximately €12.8 million.

Other shareholders were given the opportunity to subscribe to the open offer on the basis of one new ordinary share for every three existing ordinary shares. Doing so will result in a dilution of 47.1 per cent, while not participating results in a more substantial dilution of 60.3 per cent.

Although former majority shareholder Sir Anthony O’Reilly and his family, who have a 13.3 per cent interest in the media group, participated in the open offer, his share will now be diluted by 47.1 per cent to about 7 per cent. If he had chosen not to participate, his share would have fallen to about 5 per cent.

Mr Crowley said he did not believe it was unfair that all shareholders had not received the same opportunity to participate in the firm placing element of the capital raise.

“I wouldn’t say it was an unfair situation. It was just a necessary step to make sure we achieved this capital raise, which I think was in the interests of all shareholders, because if we didn’t achieve this capital raise, the banks would have owned 70 per cent of us. And I think all shareholders would have been severely worse off on the back of that,” he said.

“We have new structures in place with the editor-in-chief and the structures flowing down from that, which I think give some level of comfort in terms of the editorial independence of the various titles in the group,” he added.

INM has placed 86.3 per cent of shares in its open offer arrangement, with the remaining 13.7 per cent of shares being allocated to the investors with whom they had been conditionally placed. The company is now on course to issue nearly 615 million new shares at 7 cent later this week.

This share issue is the final stage in the group's financial restructuring, which also included the sale of its South African interests, as well as a restructuring of its defined benefit pension scheme. The plan was designed to cut core debt from about €440 million to €118 million. The capital raise also follows the agreement, announced in April, in which a consortium of eight banks, including AIB and Bank of Ireland, agreed to write off almost €140 million of the media group's debt.

Following the capital raise, the group’s lenders will own about 11 per cent of the company, while the employee benefit trust will own a further 5 per cent.

Mr Crowley said he believed the company’s level of debt was now “very sustainable”. However, the company will embark on a fresh round of cost-cutting in 2014, on top of its recent €26 million cost-cutting exercise.

“We are looking again at costs,” he said, declining to put a figure on the size of future cuts. The savings will come from a mixture of job cuts and productivity gains, he said.

“I think in any cost cuts, inevitably there are some headcount reductions that will arise, but we’re not clear at this stage in terms of the extent of it.”

A paywall on Independent.ie is “on hold” while INM concentrates on monetising its mobile platforms, but it is “not off the agenda”, Mr Crowley confirmed. The company is “still finalising” the price on its new iPad app, which will be launched shortly.

Mr Buckley, a long-term business associate of Mr O’Brien, told shareholders at this morning’s meeting that he believed this was a once-off rights issue. “We don’t anticipate having to come to the market for a number of years.”

When asked by a shareholder if the company was “turning the corner”, the chairman replied “oh yeah”, but added that it was “a long hard road ahead” and that it could be five to six years before the company is able to pay shareholders a dividend. “I wouldn’t want to make any Christmas promises,” he said.