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'I will destroy you and your father and I will go after everything'

ON A Thursday evening in late August, during a surprise call from Denis O'Brien in Ibiza, the battle lines were drawn for an almighty contest for control of Ireland's biggest media group.

The billionaire business tycoon had interrupted a break to 'phone the chief executive of Independent News & Media, Gavin O'Reilly.

Mr O'Reilly was in his office, preparing to present interim results the next day in a difficult financial period for the company long associated with the O'Reilly family.

Profits have fallen, and the share price has collapsed like most other media companies. The company is trying to restructure debts of €1.3bn to help refinance a €200m bond that was due to be paid in May.

Mr O'Brien, who built up a 26 per cent stake in the firm to become the second biggest shareholder after Sir Anthony O'Reilly and his family, has strident views on how the company should deal with the crisis, and more particularly seems to suggest that he knows how the company should be run in the future.

A review of the extent of Denis O'Brien's media interests by the Broadcasting Commission, carried out in the wake of the appointment of his associates to the Independent News & Media (INM) board earlier this year, revealed that along with his 26 per cent of INM, Mr O'Brien has extensive radio interests, including the national stations Today FM and Newstalk, as well as Dublin stations Spin 103.8 and Dublin's 98, and he has a substantial stake in Spin South West.

Although he does not sit on the board of INM, three of his very close associates do. Lucy Gaffney, Paul Connolly and Leslie Buckley have worked with Mr O'Brien since he won the controversial state mobile phone contract on which he built his fortune.

It was the conduct at a recent board meeting that was foremost on Mr O'Brien's mind during the call with the chief executive. Paul Connolly listened in.

According to a source close to INM, the board meeting in question on August 19 had been particularly acrimonious. On the agenda was the sale of its South African outdoor advertising firm, a key part of the company's restructuring plan, to raise €98m towards the resolution of the company's re-financing. Having previously supported the company's disposal strategy, in recent months Mr O'Brien has publicly opposed the sale arguing that it was too profitable an asset.

The directors voted in favour, based on ongoing negotiations with INM's creditors, who would be central to ensuring INM's future.

Tensions were high. Lucy Gaffney clashed with Baroness Margaret Jay, a former leader of the House of Lords, who is the senior independent director on the INM board. The independence of the Baroness had been questioned and she defended herself in robust terms.

Mr O'Brien complained about the conduct at the board meeting and the treatment of his three associates, according to the source.

He challenged Mr O'Reilly to take action and went on to criticise his stewardship of the company. He issued a series of ultimatums and threatened to call an extraordinary general meeting if they weren't implemented.

Mr O'Reilly protested. Mr O'Brien's criticisms intensified, culminating with Mr O'Brien's threat to Mr O'Reilly: "I will destroy you and your father and I will go after everything."

The day after the phone call, INM presented its interim results and confirmed the planned sale of INM Outdoor.

True to his word, Mr O'Brien emailed the company secretary three days later to seek an extraordinary general meeting (egm) to block the sale of its South African outdoor advertising firm.

At dawn on Wednesday, the hostilities burst into the open when an early morning email brought news of Mr O'Brien's call for an egm to journalists and the markets.

Denis O'Brien had no comment to make to the Sunday Independent on the telephone call or any other matter relating to INM. His remarkable exchange with Gavin O'Reilly has set the tone for what many believe is gearing up to be the final showdown in a fraught and divisive battle for control of the global publisher with more than 200 titles in Ireland, the UK, Australia, New Zealand, India and South Africa. The company employs 9,600 people worldwide, and includes amongst its holdings 130 radio stations in Australasia and 17 newspapers in South Africa.

The encounter has also fed suspicions in some quarters that Mr O'Brien's pursuit of the newspaper group is not just business; it's also personal. The challenge pitted the 51-year-old tycoon, reputed to be worth €2.5bn, against Sir Anthony O'Reilly, the biggest shareholder in INM, who has dominated Irish business for decades, and his family.

The billionaires had crossed paths before. A joint venture of INM's was involved in a consortium which bid for the state mobile phone licence in 1995. Mr O'Brien's consortium eventually won. Later when Mr O'Brien and Sir Anthony went after Eircom, Sir Anthony O'Reilly won.

But those were straight business fights and did not warrant a mention in a letter brimming with resentment which Denis O'Brien wrote to Gavin O'Reilly in 2003. He was responding to a congratulatory note from Mr O'Reilly complimenting him on his chairmanship of the Special Olympics.

"Forgive me, but my first reaction was to throw it in the bin. As far as I am concerned, Independent News and Media have spent the last seven years trying to destroy my reputation. Some of the coverage of my affairs, both business and personal, in the Sunday Tribune, Sunday Independent, Irish Independent and Evening Herald have caused hurt and enormous damage to my reputation, not to mention the emotional distress suffered by my wife, Catherine and my family. I very much doubt whether you or your family could have survived a similar onslaught."

He finished on a cryptic note: "While I am waiting for the appropriate time to rectify the damage, I appreciate your gesture and in a spirit of goodwill I am willing to meet you to see whether we share any common ground."

Three years after writing that, Denis O'Brien began building his stake in INM and became a vocal critic of the company.

He called for the resignation of Sir Anthony O'Reilly, as chief executive, for the board to be slimmed down and demanded the sale of the London Independent titles. He challenged directors' expenses publicly and was a general thorn in their side.

When the board issued a statement in March 2008 declaring Mr O'Brien a dissident investor, his 2003 letter to Gavin O'Reilly was cited as possible explanation for his motives.

"In the light of this, we believe it is reasonable to question Mr O'Brien's emotive reaction to the legitimate news coverage," the statement said.

Denis O'Brien countered that INM's statement was a "highly personal and unwarranted attack. I have always been, and remain, committed to investing for long-term value for all shareholders and look forward to seeing signs of a similar approach from the board of directors," he said.

An uneasy peace was brokered in March. The company embarked on a restructuring of the board to face the financial challenges ahead. Sir Anthony became President Emeritus. His son, Gavin, was appointed chief executive by a slimmed-down board that included three of Denis O'Brien's associates. Gavin O'Reilly declared the rivalry was old news and welcomed a new era.

Mr O'Brien has repeatedly maintained that his interest in INM is purely business. He told the Telegraph as much in February when asked whether there was a personal motive behind his move on the group.

For much of this decade Mr O'Brien has built his business interests in communications and mobile phone operations across the globe under the shadow of the Moriarty Tribunal.

The tribunal is investigating the awarding of the much-coveted state mobile phone licence to Mr O'Brien in 1995 when Michael Lowry, the now independent TD, was a Fine Gael minister.

Mr O'Brien has fought the tribunal tooth and nail, most recently giving a round of newspaper interviews, including to this newspaper, in which he excoriated the tribunal as a waste of taxpayers' money, pursuing a line of investigation that he says simply does not stand up.

In The Irish Times last month, he wrote: "There are those who would suggest that I am getting in my retaliation first by attacking the tribunal's provisional findings or (as per The Irish Times front page) that I am hoping to damage the reputation of the tribunal in an effort to lessen the impact of its final report. This is not the case. I simply cannot, and will not, accept the provisional findings."

The Moriarty Tribunal is expected to deliver its report this side of Christmas. Its publication could overshadow the latest outbreak of hostilities at INM which could play out for several months.

INM must hold an egm within two months of receiving a valid requisition. Shareholders will then effectively be asked to back Gavin O'Reilly or Denis O'Brien.

In the five-page emailed letter to INM, Denis O'Brien said: "The question all shareholders have to ask themselves is does this legacy board and management have the ability to make their investment grow. Or do we need change?"

He accused the board of operating very much under the influence and control of Sir Anthony O'Reilly and the O'Reilly family and claimed this is compromising the board's independence and judgement in these challenging times.

He wrote that the directors had presided over the collapse of the equity value of the company from €3bn to €200m in less than two years.

He had no confidence in the board's ability to raise the money needed to satisfy the bondholders. He described the London head office as an indulgence it could ill-afford and described the company's UK publication, the Independent, as a vanity project. Denis O'Brien has listed eight resolutions to be put to shareholders at the egm he is demanding. They include the removal or replacement of directors, including the chairman, Brian Hillery; selling or closing the London Independent titles; closing the UK executive office; stopping annual payments of €300,000 to Sir Anthony O'Reilly; and providing shareholders with a detailed list of directors' expenses dating back to 2000.

The key resolution is aimed at blocking the sale of INM Outdoor business which is key to the restructuring plan to repay bondholders, secure long-term bank financing and provide financial stability -- and which appears to have triggered Mr O'Brien's haste in calling for an egm.

In response, INM said the board appointments and the sale of the South African business were unanimously agreed last March. Closing the London titles could cost £30m in forced payments. The group's Board agreed strategy is to bring the titles to break even. As to the payments to Sir Anthony O'Reilly, there weren't any.

The company said it was achieving solid progress on its debt reduction and was seeking a "final lasting solution" to the company's immediate financing difficulties.

One observer outlined the worst case scenario if the sale of INM Outdoor does not proceed: a nervous creditor could recall a debt, forcing the company into examinership and wiping the share value.

Given that INM is a solid business, other than that it has been hit with refinancing at this time, an examinership is ruinous for pretty much all of the stakeholders, he said.

There is no clear alternative to the sale in Mr O'Brien's proposed resolutions. Reuters quoted him as saying earlier this year: "If they think Denis O'Brien is going to write a cheque to the bond holders, then they are smoking dope."

In a statement on Friday, Gavin O'Reilly challenged Mr O'Brien to come clean on his intentions.

"The matters facing INM are very serious and this is a time for serious behaviour, not what appears to be a personal vendetta that is directly impacting stakeholder value. If Mr O'Brien has a constructive proposal to put to shareholders, let's hear it before asking shareholders to abandon an agreed road map to financial stability," he said.

"Conversely, if Mr O'Brien's aim is to unilaterally wrestle control of this company then he should avoid the back door and make a transparent bid for the company."