Monday 23 September 2019

Plan to pay inflated price for Newstalk 'could not have succeeded', says INM

Former INM chairman Leslie Buckley (right) with former CEO Robert Pitt at the company’s AGM in the Westbury Hotel, Dublin in 2015. Photo: Frank McGrath
Former INM chairman Leslie Buckley (right) with former CEO Robert Pitt at the company’s AGM in the Westbury Hotel, Dublin in 2015. Photo: Frank McGrath
Shane Phelan

Shane Phelan

Independent News & Media (INM) has claimed that even if former chairman Leslie Buckley did apply pressure for the company to buy Newstalk at an inflated price, the plan "could not possibly have succeeded".

The payment of an inflated price would have benefited INM's largest shareholder Denis O'Brien, who owns Newstalk. Mr Buckley, who stepped down in March, was Mr O'Brien's nominee to the INM board.

During discussions between INM and Mr O'Brien's Communicorp Group, valuations for Newstalk drawn up by advisors for both sides varied from €10m to €35m. Ultimately the deal did not proceed.

But INM's former chief executive Robert Pitt made protected disclosures about the matter to INM and the corporate watchdog around the time the deal collapsed in November 2016.

It is one of several corporate governance issues at INM the Office of the Director of Corporate Enforcement (ODCE) has been investigating for the past year.

However, in court papers, the country's largest media group says its "checks and balances" would have ensured it did not pay over the odds for the loss-making radio station.

The ODCE wants the High Court to appoint inspectors to investigate allegations by Mr Pitt that he was asked by Mr Buckley on at least three occasions to influence the price upwards.

In an affidavit opposing the appointment of inspectors, INM director Dr Len O'Hagan said a board committee which examined Mr Pitt's allegations understood "that if, as was alleged, there had been any such plan to benefit a particular shareholder, it could not possibly have succeeded given the checks and balances that were in place in INM".

Dr O'Hagan said any deal would have been scrutinised by a mergers and acquisitions committee of the board and by the full board and, if approved, put to a vote of shareholders.

Neither Mr O'Brien nor his associates would have been entitled to vote.

Mr Buckley is alleged to have told Mr Pitt and INM chief financial officer Ryan Preston that he would "do the deal regardless" and that a €14m valuation placed on Newstalk by INM's advisers Davy was "insulting to the major shareholder".

He is also alleged to have said Mr O'Brien was "entitled to a reward for bailing out INM".

Mr Buckley has pledged to robustly defend his position, but Mr O'Brien has yet to comment.

An independent review commissioned by INM was unable reach conclusions on the Newstalk allegations due to a "stark conflict" between the accounts of Mr Pitt and Mr Preston on one side, and Mr Buckley on the other. Dr O'Hagan said INM did not accept the inability of the reviewers to resolve the conflict of evidence could justify the appointment of inspectors.

Mr Drennan also wants inspectors to investigate a proposed "success fee" for a Denis O'Brien owned company, Island Capital, in connection with the sale in 2015 of INM's shares in Australian media group APN.

Mr Pitt had concerns about the fee proposal, passed to him by Mr Buckley, as he believed Island Capital added no value to the sale. The request was ultimately "pulled".

However, Dr O'Hagan said the independent review found no wrongdoing and was satisfied Island Capital did work of significant value on the deal.

He also claimed Mr Pitt had "difficulties" after arriving at INM from a supermarket chain in 2014. Mr Pitt's probationary period was extended due to doubts some of the board had and Mr Buckley engaged an executive coach to help him.

Dr O'Hagan said Mr Pitt made complaints about the board, while INM in turn received complaints from third parties about Mr Pitt.

"The board was not happy with his performance at board meetings and found he was not forming a proper working relationship with the board," said Dr O'Hagan.

The board decided Mr Pitt should be replaced in October 2016, a few weeks before his initial protected disclosure.

However, this was not communicated to him by the time he made the disclosures.

Mr Pitt eventually left the company in October last year with a €1.5m severance package.

Irish Independent

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