September 2, 2009 / 6:53 AM / 10 years ago

UPDATE 3-O'Brien and O'Reillys gear for Independent showdown

* Core investor wants flagship UK titles sold or closed

* Wants sale of INM Outdoor halted, chairman ousted

* Intervention comes at delicate stage in bond talks

* Shares trim steep early losses (Recasts with IN&M response)

By Carmel Crimmins

DUBLIN, Sept 2 (Reuters) - Irish billionaire Denis O’Brien and the O’Reilly dynasty geared up on Wednesday for a public showdown over the future of Independent News & Media INME.I, further battering the beleaguered publisher’s stock.

The heavily-indebted media group, which is run by the O’Reillys, firmly rejected O’Brien’s demands for a U-turn on its South African disposal plan, which it said was crucial to securing a refinancing deal on a 200 million euro ($284.8 million) senior note that it was meant to repay in May.

“It is difficult to see how Mr. O’Brien’s actions assist in the resolution of the financial restructuring, which the board believes is in the best interests of the company and its stakeholders,” IN&M said in a statement.

O’Brien, who after the O’Reillys is the second-largest shareholder in IN&M, ended a six-month truce on Wednesday with a call for an EGM to force a sale or closure of the group’s loss-making UK broadsheet titles, halt the sale of its South African advertising business and oust its chairman.

IN&M’s chief executive, Gavin O’Reilly, said last week the group had agreed to sell INM Outdoor for 1.1 billion rand ($139.9 million) to a London-based private equity group, raising much needed cash as a fresh Sept 25 deadline looms to sort out its bond obligation.

“I can understand why Denis is suggesting they are selling good assets in a bad market but there is a rationale behind it and you have to balance both sides here,” said Gerry Hennigan, analyst with Goodbody Stockbrokers.

“I am not sure if he will be successful but he is obviously intent on getting his views heard.”

By 1350 GMT, IN&M was trading down 6 percent at nearly 25 cents, valuing the group at around 210 million euros, a fraction of its 1.3 billion euro debt pile. It had earlier fallen 19 percent.

Agreement on an EGM is expected in the coming days.

NOTHING TO LOSE

O’Brien, who has lost around half a billion euros on his 26 percent INM stake, had been a thorn in the side of the O’Reilly family, until March, when he appeared to cease hostilities after Anthony O’Reilly agreed to retire as chief executive and hand the reins to his son.[ID:nLD390625]

But the colourful telecoms tycoon, who recently replaced the patrician Anthony O’Reilly as Ireland’s third-richest person, has run out of patience as negotiations with bondholders drag on.

“He is playing a very aggressive game, knowing that he has nothing to lose,” said one Dublin-based analyst.

“I think he still has an interest in being a controlling investor at day one of a new Independent but it is a question of the damage beforehand. Open warfare is not helpful.”

In addition to gripes over strategy, O’Brien, who bankrolls the salary of the Irish soccer manager, has called for the dismissal of Brian Hillery as chairman and a halt to annual payments of 300,000 euros to Anthony O’Reilly for his position as President Emeritus of the group.

IN&M responded by pointing out that Hillery’s appointment was unanimously approved and said O’Reilly, a former rugby international and once of the United States’ highest paid executives, had not been paid for his role as President Emeritus.

O’Brien has also called for the closure of the company’s London executive office and a detailed schedule of all board member expenses since 2000.

Editing by John Stonestreet and Rupert Winchester

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