'Success fee' proposed for firm in disposal of media company probed
The corporate enforcement watchdog says it wants to investigate a proposed "success fee" in connection with the disposal of Independent News and Media’s holding in an Australian and New Zealand media company, APN.
This is despite independent reviewers finding the company involved, Island Capital, was found to have done work of significant value to INM in connection with the share sale.
The reviewers, including a now High Court judge and former Bar Council head, found there was no wrongdoing in respect of the success fee proposal.
Island Capital is an advisory company, which is described in a High Court affidavit as owned by businessman Denis O’Brien, INM’s largest single shareholder.
According to the head of the State’s corporate watchdog, now departed ceo Robert Pitt had concerns about the alleged fee proposal as he believed Island Capital added no value in relation to the sale of INM’s shares in APN News & Media.
However, independent reviewers, commissioned by INM in the wake of protected disclosures to INM and the Office of the Director of Corporate Enforcement (ODCE) by Mr Pitt, found that Island Capital had, in fact, done work of significant value to INM in connection with the share sale and no wrongdoing was found.
Mr Pitt, a former supermarket operations chief, was also of the view any such fee would have to be declared as a related party transaction in INM’s accounts if it proceeded.
No fee was ultimately paid after, according to ODCE’s account of Mr Pitt’s disclosures in November 2016, the request was “pulled”.
Now Ian Drennan, of the State’s corporate watchdog, the ODCE, wants the High Court to allow inspectors to establish the circumstances concerning the proposed payment and the role played by former INM chairman Leslie Buckley in relation to the proposal.
INM announced an agreement to sell its stake in APN for €121.3m in March 2015.
INM is the publisher of the Irish Independent.
In an affidavit supporting his application for the appointment of inspectors to INM, Mr Drennan claims that on the day the transaction was to be completed, Mr Pitt and then INM senior independent director Jerome Kennedy received an email from Mr Buckley “asking them to insert a fee structure for Island Capital for 0.9pc”.
According to the affidavit, Island Capital is a company owned by Mr O’Brien.
It alleges that on March 13, 2015 Mr Buckley received an email from Dermot Hayes of Island Capital which stated: “We have proposed a success fee of 0.9pc of the transaction proceeds.”
The affidavit says that on March 18, the day the transaction was to complete, Mr Buckley sent an email to Mr Pitt and Mr Kennedy, forwarding Mr Hayes’ email. Mr Hayes declined to comment.
Mr Drennan, meanwhile, says in his affidavit: “It was asserted by Mr Pitt that advice was received that, if such a fee arrangement was included, it would have to be disclosed (due to the related party nature of the transaction) and that, on receipt of that advice, the additional term ‘was pulled’.”
Following Mr Pitt’s disclosure to INM, the company appointed independent reviewers David Barniville SC, now a High Court judge, and Stephen Kingon, former managing partner of PricewaterhouseCoopers in Northern Ireland, to examine the success fee allegation and other matters.
Both reviewers concluded Island Capital had done significant work of value to INM in connection with the sale of the shares and that they had been particularly persuaded by the evidence of Mr Kennedy in this regard.
They found that there was “no wrongdoing” and also “no breach of applicable principles of corporate governance”.
It was not good corporate governance to not have finalised an agreement with Island Capital at an earlier stage, the reviewers said.
In his affidavit, Mr Drennan again claims that while he noted the conclusions of the independent reviewers, it was not clear from their report the basis on which they preferred the evidence of Mr Kennedy over the evidence of Mr Pitt in relation to the value to INM of the work done.
Mr Drennan claims it was also of relevance that the independent reviewers found that there was no proper transparent discussion between INM and Island Capital.
He says they also found that, given the relationship between Mr O’Brien and Island Capital, it was important the terms of engagement “were tied down so that provision for the payment of a fee to Island Capital would have been clearly agreed in advance and obvious for all concerned” and that “the failure to pin down this issue well in advance ... was not good corporate governance”.