De­nis O’Brien met Davy of­fi­cial dur­ing inquiry into INM-New­stalk deal

The Irish Times - Weekend Review - - FRONT PAGE -

Texts from the busi­ness­man De­nis O’Brien (right) show he met a se­nior ad­viser in Davy Cor­po­rate Fi­nance prior to the ad­viser in­ter­ven­ing in an in­ter­nal dis­pute in In­de­pen­dent News & Me­dia (INM), court doc­u­ments shows.

The texts form part of an af­fi­davit filed in the High Court, but not yet opened, by the Di­rec­tor of Cor­po­rate En­force­ment, Ian Dren­nan. The af­fi­davit ex­presses con­cern about a pro­posal in 2016 that INM would buy O’Brien’s New­stalk ra­dio sta­tion, for a price that se­nior INM ex­ec­u­tives felt was “crazy”.

O’Brien is INM’s largest share­holder and INM chair­man Les­lie Buck­ley (far right), a long-time busi­ness as­so­ciate, was an O’Brien nom­i­nee on the INM board.

In Septem­ber 2016, ac­cord­ing to the af­fi­davit, INM’s ad­vis­ers, Davy, were of the view that the loss-mak­ing ra­dio sta­tion was not worth more than ¤14 mil­lion.

How­ever at a meet­ing on Oc­to­ber 14th, 2016, IBI, who were ad­vis­ers to New­stalk’s own­ers, Com­mu­ni­corp, pro­posed a val­u­a­tion of ¤30 mil­lion to ¤35 mil­lion.

After the Oc­to­ber 14th meet­ing, ac­cord­ing to Pitt, he spoke with Ivan Murphy, managing di­rec­tor of Davy Cor­po­rate Fi­nance, who said the trans­ac­tion would not be good value.

On Oc­to­ber 29th, 2016, Pitt, Buck­ley, and the INM chief fi­nan­cial of­fi­cer, Ryan Pre­ston, met to dis­cuss the mat­ter. Buck­ley ap­peared an­noyed and told the ex­ec­u­tives he would not let “neg­a­tiv­ity” stand in the way of the deal, and that a val­u­a­tion of ¤14 mil­lion was “in­sult­ing to the ma­jor share­holder [O’Brien]”.

The next day Pitt pre­sented Buck­ley with an up­dated Davy val­u­a­tion that priced New­stalk, tak­ing into ac­count all the syn­er­gies that could be achieved if it was bought by INM, at be­tween ¤11 mil­lion and ¤15 mil­lion. Ac­cord­ing to Pitt, Buck­ley said he would dis­cuss Pitt’s views with O’Brien.

On Oc­to­ber 26th, 2016, Pat Claf­fey of Is­land Capital, an O’Brien com­pany, met Pitt and sug­gested a price for New­stalk of ¤26.8 mil­lion.

It was after this that Pitt and Pre­ston met with Buck­ley for a meet­ing that, ac­cord­ing to Pitt, left him “quite alarmed”. Ac­cord­ing to the Dren­nan af­fi­davit, Pitt said that Buck­ley ex­pressed him­self as very dis­ap­pointed about their re­sis­tance to the deal and asked the ex­ec­u­tives: “Do you not get it lads?”

Ac­cord­ing to the af­fi­davit, Pitt claimed in his pro­tected dis­clo­sure that Buck­ley also said that Davy could be in­flu­enced to “write in their val­u­a­tion what man­age- ment told them to write”.

Also on Oc­to­ber 26th, ac­cord­ing to the af­fi­davit, Pitt spoke with Murphy and Roland French of Davy. Davy still be­lieved the IBI val­u­a­tion was “ex­tremely high”. A fur­ther Davy val­u­a­tion of ¤12.3 mil­lion to ¤15.6 mil­lion was drafted. On the 28th, ac­cord­ing to the af­fi­davit, Buck­ley told Pitt he was very dis­ap­pointed that Pitt had not in­flu­enced Davy to move closer to the IBI fig­ure.

When Pre­ston made a pro­tected dis­clo­sure to INM in De­cem­ber 2016, it cor­rob­o­rated what had been said by Pitt in his a month ear­lier. Pre­ston, ac­cord­ing to the Dren­nan af­fi­davit, said he be­lieved the IBI val­u­a­tion was “crazy”, that the logic used was bor­der­ing on “in­sult­ing”, and that even the Davy val­u­a­tion was “ex­ces­sive”.

He also said that Buck­ley, at the meet­ing on Oc­to­ber 26th, said he was “not go­ing back to De­nis on price again” and that he “wanted to do the deal”.

By Jan­uary 2017 the board of INM had ap­pointed in­de­pen­dent re­view­ers to con­sider the dis­clo­sures that had been made. On Jan­uary 30th, ac­cord­ing to the Dren­nan af­fi­davit, Murphy, of Davy, con­tacted INM, ex­pressed a con­cern about the po­ten­tial for the row to af­fect “share­holder value” and sug­gested he could “put some colour” on the Davy view of what had oc­curred that might not be ap­par­ent from the writ­ten records they al­ready had.

In due course he met with the Re­view­ers and, among other mat­ters, said that it was “en­tirely nor­mal” for there to be rig­or­ous de­bate at board level and ro­bust dis­cus­sions be­tween the chair­man and chief ex­ec­u­tives of plcs. He also said that the New­stalk deal had not gone ahead, and that Davy “didn’t re­ally see this thing get­ting past first base, shall we say”.

In March, Pitt told the Re­view­ers that what Murphy had told them seemed to dif­fer from what Murphy told Pitt in 2016 dur­ing con­ver­sa­tions which he had recorded, by way of emails to him­self and his so­lic­i­tor Donal Spring. He said he did not know Murphy’s rea­son for chang­ing his po­si­tion “but it was quite clear to me what he thought at the time”.

Murphy, in April, said it was not the case, as as­serted by Pitt, that he had changed his po­si­tion. “I be­lieve my po­si­tion has been con­sis­tent through­out.”

In his af­fi­davit, Dren­nan also refers to cor­re­spon­dence be­tween the Re­view­ers and Cor­mac McNulty, di­rec­tor of merg­ers and ac­qui­si­tions at INM, whose ev­i­dence to the Re­view­ers, Dren­nan said, ap­pears to be largely con­sis­tent with Pitt’s in re­la­tion to the at­ti­tude of Murphy. McNulty said Pitt was cor­rect when he said that Murphy had been wor­ried that Buck­ley was not “re­cus­ing him­self” from in­volve­ment in the New­stalk ne­go­ti­a­tions and about how this would be per­ceived pub­licly if it be­came known. Pitt, ac­cord­ing to Dren­nan, had re­ferred to Buck­ley’s of­fice be­ing “only a cou­ple of doors down” from O’Brien’s. (This may be a ref­er­ence to the suite of of­fices O’Brien and his staff have on Grand Canal Street, Dublin.) McNulty said it was he who had ex­pressed this view to Murphy, in re­sponse to con­cerns ex­pressed by Murphy about Buck­ley be­ing in­volved in the pro­posed deal. Dren­nan’s af­fi­davit also quotes McNulty as con­firm­ing that Murphy had ex­pressed the view in 2016 that there would be se­ri­ous rep­u­ta­tional risk for Davy in at­tach­ing its name to any cir­cu­lar to share­hold­ers that would have to be is­sued after any deal given the val­u­a­tions for New­stalk that were be­ing dis­cussed. When McNulty’s views were for­warded to Murphy by the Re­view­ers, he said that he did not be­lieve his ac­count and that of McNulty were in­con­sis­tent. Hav­ing re­viewed these mat­ters in his af­fi­davit, Dren­nan then quotes some text ex­changes be­tween O’Brien and Buck­ley from Jan­uary 2017.

On Fri­day, Jan­uary 27th, Buck­ley sent a text to O’Brien: “Hi De­nis thanks so much for meet­ing your man to­day and great that he is pre­pared to meet with the Re­view­ers – Is he go­ing to make con­tact with [INM le­gal ad­vis­ers] McCann Fitzger­ald or will I give him a call. I’m mak­ing con­tact with JD. I think this can be a real turn­ing point for me so thanks a mil­lion Les­lie”.

O’Brien replied: “He will do it di­rectly.. all good I think he can help. Bet­ter for you not to make con­tact Have a great week­end”.

On the Mon­day Buck­ley texted O’Brien to say “John D is meet­ing your man” on the fol­low­ing Thurs­day.

Ac­cord­ing to the af­fi­davit, Buck­ley has con­firmed to Dren­nan that the “your man” re­ferred to is Ivan Murphy and that JD is J D Buck­ley, Les­lie Buck­ley’s son.

In his af­fi­davit, Dren­nan said he has con­cerns about these com­mu­ni­ca­tions which pre­ceded Murphy’s ap­proach to the in­de­pen­dent re­view­ers and the re­view­ers’ “ap­par­ent lack of knowl­edge of same”.

A re­quest for a comment from Davy was met with no re­sponse. Buck­ley has said he will de­fend him­self against all ac­cu­sa­tions. O’Brien has yet to comment on the con­tro­versy at INM.

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