O’Reilly family deserves credit for supporting Independent

Roy Greenslade
9 Sep 2009

To write about the problems now besetting the company that owns The Independent is rather like intruding on personal grief because of its significance to the O'Reilly family, most notably its patriarch, Sir Anthony John Francis O'Reilly.

It's a wonder that the man who has supported the paper ever since he acquired his first stake in 1994 has not gone mad after the events of the past year, which have witnessed the decimation of his company's stock market value, his own forced resignation as chief executive and a seemingly endless and bitter struggle with a troublesome shareholder.

Though the saga has had its farcical moments, it has all the hallmarks of turning into a tragedy. At stake is the very existence of The Independent and the Independent on Sunday, two national papers that have survived entirely due to O'Reilly's patronage.

Like almost every newspaper publisher in Europe and north America, O'Reilly's Independent News & Media (INM) finds itself in deep financial trouble. Advertising, the media's lifeblood, has dried up because of the recession. The downturn happened just as papers were already coping with the gradual migration of lucrative classified advertising to the internet.

Meanwhile, circulations were continuing their long-term downward trend, only partially offset by an upturn in online readership.

For businesses that had been acquisitive in the boom years, building up debts in order to expand, it was soon clear that they faced a crisis.

Investors suddenly deserted, severely reducing the market capitalisation of companies once lauded by stockbroking analysts. Credit lines vanished. Banks, themselves mired in crisis, showed little sympathy for borrowers. The debt mountains that gave owners so little concern just a few years ago became nightmares. How would publishers pay off their debts when revenue had shrunk and operating profits were, if they existed at all, negligible?

INM was a classic example. From its Dublin base, where it dominated the Irish newspaper industry (as it still does), O'Reilly had built it into a global media conglomerate, with newspaper, television, radio and outdoor advertising businesses in Australia, New Zealand, South Africa, Portugal and Britain. Seemingly, the big man could do no wrong. He got involved in a host of other interests, such as Waterford Wedgwood, metal mining and oil and gas exploration. Everything he touched seemed to turn to gold.

But the glitter disappeared. He saw Waterford Wedgwood slide into administration while he was coping with the first, and only, major assault launched against his beloved INM. A rival Irish media tycoon, Denis O'Brien, did not only buy up shares, he made a habit of lambasting the way O'Reilly ran his company.

At first, O'Reilly shrugged aside the interloper's criticisms about the way a public company was run as if it were a private family fiefdom, about stacking the INM board with friends and famous faces rather than hard-headed business figures and, most particularly, about sacrificing millions on the continued ownership of the London-based Independent titles.

O'Brien would not go away. He built up his stake until it reached 26%, making him the second largest shareholder after O'Reilly, and he kept up his barrage of public complaints. With debt repayments looming, O'Reilly and his son, Gavin — then head of INM's UK division — decided that they had had enough of O'Brien urinating into their tent and invited him inside in the hope that he might be more discreet.

O'Brien struck a hard bargain. He demanded that the board lose some of its ornaments, that he was given places for three of his own executives and, most painful of all, that 73-year-old O'Reilly père should step aside as chief executive in favour of O'Reilly fils. He duly became INM's president emeritus. To cut costs earlier this year, the Independent titles in London also moved into the Kensington offices of the Daily Mail and General Trust, the minority shareholder in the Evening Standard.

Gavin O'Reilly, like his father, exudes charm. But he soon discovered that O'Brien was immune to it.

As Gavin struggled to negotiate a deal with bondholders demanding the repayment of a £180 million loan and talked to possible new investors (German media giant Axel Springer has been mooted), O'Brien began to micturate inside the tent, giving the clearest possible indication that he disagreed with key decisions, such as the sale of INM's profitable South African outdoor advertising business and continuing his call for the sale or closure of The Independent.

Those calls were repeated last week in his latest public attack, in which he demanded an emergency general meeting to discuss eight specific motions designed to dilute yet further the power and influence of the O'Reilly family within INM. O'Brien is unlikely to succeed in bringing about the changes he wants, which include the embarrassing matter of cutting off annual payments to Tony O'Reilly, because his nominees on the board are in the minority and the majority of shareholders are likely to side with the O'Reillys.

But the damage of these rows is incalculable.

Though O'Brien is obviously a loose cannon, some of his concerns about INM do have merit. In the good times it didn't matter that it was a family business masquerading as a public company. The bad times have exposed the anomalies. But we must also pay full tribute to the O'Reillys for their willingness to underwrite losses of some £250 million at the Independent titles over the course of INM's ownership.

There are at least five reasons why people choose to own papers — profit, propaganda, prestige, political influence and public service. Some of these overlap. In Tony O'Reilly's case, his stewardship of The Independent was all about prestige, as he has openly admitted while making largely spurious claims about the paper being of value to his global empire.

Seen from the perspective of those of us who support press diversity in Britain, the publication of The Independent has been wholly positive. In a very real sense, it amounts to a public service. As the Irish like to say when complimenting someone with whom they do not necessarily agree: “Fair play to him for that.”