Sunday 22 April 2018

Newstalk valuations ranged from €10m to €35m in talks

Robert Pitt and Leslie Buckley
Robert Pitt and Leslie Buckley

Dearbhail McDonald and Shane Phelan

VARIATIONS in the valuation of Newstalk punctuated the planned but aborted acquisition of the Denis O’Brien owned radio station by Independent News and Media (INM), the media company in which he is the largest single shareholder.

In court papers filed by the corporate enforcement watchdog, which is seeking to have inspectors appointed to investigate a range of corporate governance issues at Ireland’s largest media company, valuations ranging between €10m to €35m for the loss-making radio station were considered during the short-lived negotiations.

The project name assigned to the proposed acquisition by INM of Newstalk was “Devalero”, the Office of the Director of Corporate Enforcement (ODCE) document claims.

Former INM chief executive Robert Pitt, whose protected disclosure to the ODCE triggered a year-long investigation into INM, initially valued the proposed Newstalk acquisition at some €12m.

INM’s own advisers, Davy, would not value Newstalk at above €14m, the ODCE’s affidavit claims.

However, IBI, advisers to Mr O’Brien’s Communicorp – which in turn wholly owns Newstalk – proposed an initial valuation for Newstalk at between €30m to €35m.

Mr Pitt had no issue in principle with the transaction, according to the ODCE’s affidavit, but was concerned about the potentially “onerous” commercial conditions that might attach to the deal as well as the high valuation of the asset, it claims.

Mr Pitt has told the ODCE that following an initial meeting on September 15, 2016 between INM and Communicorp, which was also attended by Mr O’Brien’s advisory firm, Island Capital, and Dominic Shorthouse – an adviser to Mr O’Brien - he met with INM chairman Leslie Buckley on October 20, 2016.

Ryan Preston, INM’s chief financial officer, also attended the meeting at which Mr Buckley, who retired as INM chairman last month, is alleged to have told the duo that he would “do the deal regardless” and that a valuation of €14m for Newstalk was “insulting to the major shareholder”, namely Mr O’Brien.

The ODCE says that, according to Mr Pitt, Mr Buckley also said Mr O’Brien was “entitled to a reward for bailing out INM” and that he [Buckley] wanted to do the transaction.

Last night, a spokesman for Mr Buckley said in response to a wide range of questions from the Irish Independent: “It is not appropriate to comment as a review process is ongoing.”

Mr Pitt subsequently reported his concerns about there being a need to reward Mr O’Brien to Jerome Kennedy, then an independent director on INM’s board.

Meetings subsequently took place with updated valuations from Davy and IBI, the latter’s valuation falling to some €26.8m while Davy’s revision valued Newstalk at a range of €11m to €15m, with an outlier range of €16.7m, although this outer figure was itself revised slightly down again in another valuation.

In a statement issued on November 28, 2016, to the stock market – and in response to media speculation – INM confirmed that an issue arose between its chief executive and chairman in relation to the terms of a possible acquisition by the company.

The ODCE says there is an overlap between the allegations made by Mr Preston in his protected disclosure to INM and that Mr Preston’s disclosure corroborated the disclosure made by Mr Pitt.

Mr Preston explained in his disclosure that, it is claimed, he had been put under “severe pressure” as had Mr Pitt, to pay a value which was considerable higher than he thought Newstalk to be worth and he [Mr Preston] was concerned the proposed purchase price would not represent value to INM’s shareholders.

Mr Preston thought, it is claimed, the IBI valuation was “crazy”.

“Do you not get it, lads?” Mr Buckley is alleged to have said to Mr Pitt and Mr Preston at a meeting on October 26, 2016, which was attended by the three men.

The ODCE notes a report by two independent reviewers, commissioned by INM’s board in late 2016 to investigate Mr Pitt and Mr Preston’s disclosures, was unable to resolve the key allegations regarding the proposed Newstalk discussions, namely that Mr Buckley wanted INM to pay Communicorp  €26.8m for Newstalk and that he put pressure on Mr Pitt and Mr Preston to agree that price.

This was due to what independent reviewers David Barniville SC and Stephen

Kingon, the former managing partner of PricewaterhouseCoopers in Northern Ireland, described as “a stark conflict of evidence” between Mr Pitt and Mr Preston on the one hand and Mr Buckley on the other.

The independent reviewers’ final report, which runs to almost 300 pages, said: “In the absence of cross examination in a court or tribunal-like setting (which is not the exercise we were asked to conduct), we have regrettably come to the conclusion that we are unable to resolve the stark conflict of evidence on these two allegations in relation to the Newstalk discussions.

“In those circumstances, we have been unable to reach a conclusion as to whether any ‘wrongdoing’ or ‘potential wrongdoing’ has occurred in connection with the Newstalk discussions. However, it is important to note that no agreement was reached for INM to acquire Newstalk and the potential transaction did not proceed beyond the discussion stage.”

The ODCE, which stresses that nothing in its affidavit is intended to be, or should be construed as, a criticism of the independent reviewers, says the appointment of court inspectors – with full powers of compellability and cross examination –‑ is required to resolve that conflict of evidence.

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