The ongoing share-buying struggle between Denis O'Brien and Sir Anthony O'Reilly over Independent News & Media has been featured on the blog at various points over the last 18 months or so. D O'B is now the second largest shareholder, and is approaching the c30% ownership levels which would automatically trigger a takeover situation.
In essence, Sir A O'R has built the business up globally, but media interest has recently centred on the perenially loss making UK Independent titles. The rest of the empire is subject to the same market depressions seen everywhere, but are in much ruder health than the London based titles. D O'B is not impressed with the continued investment in the London losses, and wants to force a sale, and maybe even remove A O'R from the helm.
This situation is moving ever closer to a conclusion though as the credit crisis continues, as the £1.1 billion INM borrowings start to weigh down the overall group. Six months from now, £200 million of bond needs to be redeemed, which is prompting speculation of disposals to generate cash.
With the estimated £10m+ losses annually, the Independent (UK) titles aren't going to be raising cash for the group if they are disposed of. Talks to save further cost by merging back room functions with rival publishers are apparently ongoing, but even this smacks of rearranging deckchairs while the iceberg moves ever closer. With a cover price of £1 and full rate sales of only 128,738 in September, there's not much going for the Indy titles.
Would you buy them? On the plus side, a nice brand with a niche audience, but not niche enough to attract decent ad rates. On the negative side, a commercial model that promises to break even one day, but never achieves it. Our view, a step too far from a purely commercial basis.
The Independent may be the headline in the media coverage of INM and D O'B, but it's a distraction. The real battle here is on re-financing the debt without selling the family silver to do so. Interesting 6 months ahead for the Group as a whole. The big question is on who you would put your money on to come through 2009 on top, on Sir Anthony, or D O'B?