Taking on O'Reilly

Tony O'Reilly wields enormous media, corporate and political clout. He has escaped accountability so far. Now Denis O'Brien has challengend him within IN&M and questions arise about his political access. By Vincent Browne and Martin FitzPatrick.

Tony O'Reilly has had a charmed reign as the most powerful person in Ireland. Never challenged politically, rarely journalistically, bathed in corporate obsequiousness, control of the most powerful newspapers in the country, all arraigned against actual and imagined enemies.ged him within IN&M and questions arise about his political access.

Tony O'Reilly has had a charmed reign as the most powerful person in Ireland. Never challenged politically, rarely journalistically, bathed in corporate obsequiousness, control of the most powerful newspapers in the country, all arraigned against actual and imagined enemies.

But in the last few months that prized immunity has been challenged. Questions have arisen about a secret meeting he had with Bertie Ahern and Brian Cowen at the outset of the recent election campaign. This has promoted enquiries into his dealings with the government and, in particular, with the facilitation by the outgoing coalition of his take-over of Eircom, through the consortium he led, Valentia.

It has revived memories of his dealings with the previous Rainbow government led by John Bruton when it was perceived he was willing to use his media power to advance his corporate interests – a charge he has denied indignantly.

But most particularly, he has been challenged within the formidable media corporation he controls (although owning only 28 per cent of the shareholding) by a rival Irish billionaire, Denis O'Brien, who, impertinently, has demanded answers to questions about O'Reilly's expense account, his use of the corporate jet, the financing of the famous lavish parties he hosts at his various extravagant residences, about the alleged packing of the board of the corporation with “cronies” and a pervasive absence of accountability, it is claimed.

And worse, the prospect of Independent News and Media (IN&M) being wrested from the control of the O'Reilly family has surfaced. Denis O'Brien has the where-with-all, or will have, to launch an attractive bid for the corporation, and even if he has to await the passing from the scene of the ageing O'Reilly, he has the patience and time to do so.

The massed arrays of shareholders in IN&M never have had the temerity to challenge O'Reilly until now. No one ever asked if they might be shipping any of the cost of O'Reilly's lavish lifestyle with at least three magnificent homes in Ireland, several other residences in Europe and a retreat on the taxation-friendly islands of the Bahamas.

Some of the Independent cognoscenti wondered back in 2004 why, when Tony was obliged (after critical glances from the corporate compliance set) to cease to be executive chairman, he became chief executive rather than chairman. Was it because none of the managers around him were capable of doing the job?  Even implicitly that would be a damaging admission for an important listed company. Or might the explanation be that O'Reilly wanted to be CEO because that's where the company jet resides? It would seem that Denis O'Brien believes this cynical explanation. He teed up his AGM interrogators on the question of the jet last month, only to be fobbed off on this as on the other issues he raised.

It would be a surprise if O'Brien were to drop his line of questioning on the jet. Company jets and their use and overuse have taken down a succession of previously invulnerable American CEOs in the last decade. It is a particular ostentation the investor classes find it difficult to forgive.

O'Brien will be hoping it is another damaging body blow to the present management of IN&M. Because the underlying assumption behind this confrontation is that Denis O'Brien will eventually make a bid for the Indo and he will make it easier for himself if he can weaken the O'Reilly structure before his decisive foray.

Assisting the O'Brien cause are the institutionalised vanities (aside from the Knighthood and previously the doctorate) of the O'Reilly presence in IN&M. 

The Sunday Tribune is one of these.  An endemic loss maker, the Tribune has for decades been kept alive by guarantees of financial support from the Indo. At least €42 million have been expended to keep the newspaper as a bulwark against the encroachments on the Irish Sunday market of The Sunday Times.

Similarly, the Independent Group of newspapers in London. They have been loss makers on a truly massive scale, though even the most assiduous trawl through the IN&M accounts does not disclose how much.   The losses are buried in the company's UK accounts and disappear amongst the profits of the Belfast Telegraph.  

O'Brien has already hinted that dumping the Indie papers (which were arguably one of the reasons why O'Reilly got his peerage from Tony Blair and the Queen of England) would be one of the first items on his post-O'Reilly disposal agenda.

If O'Brien is playing the long game and is trying to frighten the institutions that are backing Tony O'Reilly, he is probably going the right way about it.
The latest IN&M accounts, published in May, show three institutions, Bank of Ireland Asset Management, Barclays and Marathon Asset Management with around 23 percent of the shares between them.   Denis O'Brien has 8.3 per cent and rising.  It would cost him a bundle to mop up a share stake to match O'Reilly's. There is nothing to suggest that he is unwilling to do so and if his claims that he is prepared to cut out loss makers and increase shareholder value are believed, he could win a proxy battle but it would be difficult.  

The present regime at IN&M is saddled with a mountain of debt – just under €1.2 billion.  O'Reilly's plans to reduce this have been thwarted by a narrow failure to produce a cash generating deal with APN Newspapers in Australia.  Given all the foregoing, and mindful that financial institutions are a hardhearted bunch, they now have less reason to be impressed by the once imperious red haired rugby genius.  Video clips of tries scored in the fifties are getting increasingly grainy, and the new breed of analysts like a clear picture.

Vincent Browne: declaration of interest.
In June I had three brief phone discussions with a representative of Newstalk about working for Newstalk after requests from me to RTÉ to clarify my position with the station had remained unclarified (my contract as presenter of Tonight with Vincent Browne expires in September). Denis O'Brien has a controlling interest in the company that owns Newstalk. Tony O'Reilly has threatened legal action against me and another party because of what I have written recently concerning him.