O’Brien can’t be worse than O’Reilly

Somehow failed billionaire O’Reilly – who lost INM and Waterford Glass – escaped media derisionMartin Fitzpatrick 


There have been scores of high profile personal dramas and falls from grace during the sad and sorry Irish business sagas of the last five years, but by far the most unreported has been the fall and fall of Independent News and Media (INM) and crumbling reputation of Tony O’Reilly, or Sir Anthony as he liked to be known in recent times. Once the unquestioned ‘Golden Boy’ of Irish business, O’Reilly, now in his mid-seventies, has been allowed to slink into relative obscurity while the greater part of his fortune, which was so much part of the business discourse for three decades, has gone sailing off into the wide blue yonder, a phenomenon only too familiar to holders of bank shares.

But he has not just lost a reputation; he has also lost a media empire stretching from Dublin’s Talbot Street to the southern tip of the Cape of Good Hope and along to more remote reaches of tropical Queensland. Denis O’Brien’s heft is now blocking the frame of the INM doorway with just under 30 per cent of the stock and he looks to be geared to protect his control of the company in precisely the way O’Reilly did from the time he first arrived on the scene in 1973.

Curiously, or perhaps not so curiously, the slump in the O’Reilly fame and prestige has been largely ignored by the Irish media. O’Reilly, during the 35 years in which he controlled a sizeable part of the Irish newspaper sector, never really got a hard time from the non-O’Reilly press and now, rather than break the habit of a lifetime, the same non-INM media has tended to rally around him in his time of woe. All the Irish papers trumpeted the growth in his wealth and influence, his international standing, and the glamour that he tried to carry into his business life. But in the last four years when the value of his personal stake in Independent News and Media alone fell from just under €900m to a current €16m, and when his investment in Waterford Glass crashed into smithereens, the papers have been oddly mute about the spectacular fall.

The spates of sensational ‘where-did-it-all-go-wrong’ stories that have plagued most other failed billionaires have mostly been missing in the case of O’Reilly.

It is hard to avoid the word hubris in dealing with the life and times of Tony O’Reilly. His success came early in every aspect of his life. On the rugby football field at eighteen he was appearing for the British Lions at Ellis Park in South Africa in front of 105,000 screaming fans; good fortune came early in business too; at twenty-five he was launching Kerrygold the ‘game-changer’ for the Irish dairy sector. Even while he was holding down the post of chief executive in one of America’s great global food corporations, HJ Heinz, he was simultaneously taking control of what was then Independent Newspapers – and he wasn’t yet thirty-seven. He never ever shied away from telling the public what a singularly amazing fellow he was.

O’Reilly’s career as a newspaper proprietor can be broken down into a couple of phases. The early phase was the slow build-up to what, in the old ‘hot metal’ days, was called ‘the new technology’. The arrival of the computer would change everything in the print industry and O’Reilly was extremely patient in his planning to ensure that this change would be achieved with minimum pain. However, he knew that, once achieved, the great bulwark against revolutionary change in the industry, the print unions, would lose power and the removal of that barrier would make the sector easy pickings from then on. That calculation was inspired, precise and profitably accurate.

O’Reilly had irons in other fires too. In the early 1970s he was a major part of what was called the ‘shell company boom’ through his acquisition-vehicle, Crowe Wilson and eventually Fitzwilton. This second business front, or perhaps a third business front, foundered on the rocks of the ‘First Oil Shock’ in 1974.  Undeterred, O’Reilly was also prepared to take up the challenge of the next speculative boom when he helped mastermind the money-spinning Atlantic Resources in the early 1980s.

This was the key company which raised, but mostly dashed, hopes that offshore Ireland would become an oil province. He showed rare energy and skill in holding down his Heinz job and being part of these other ventures even if not all were successful.

The Indo was his pride and joy. When he took control of the Independent in 1973, paying £1m, it had seven titles – but by the height of the Celtic Tiger boom, INM had some 170-odd titles under its belt and a string of other media-related companies in five different countries. In the meantime Tony had accepted a knighthood and the patient, sympathetic O’Reilly, empathetic with the industry he served, gave rise to a much more hard-nosed proprietor with a continuing soft spot for personal self-aggrandisement. The Independent newspaper in London had been acquired and O’Reilly declared that the balance of his newspaper interests were to be made ‘congruent’ with this high-profile title. In the midst of this editorial colonialism what tended to be forgotten was that the London Indie  was losing a fortune. To disguise this, O’Reilly decided to acquire the highly profitable Belfast Telegraph and the Indie losses were masked by the Bel Tel profits in a so-called UK profit and loss account. It did not alter any reality but the optics looked better.

Meanwhile yet another ‘boom’ had arrived on the scene in the shape of the ‘dot com’ bubble  and INM was yet again uncomfortably late for this, resulting in investments in the sector that were just about perfectly timed to fall to the ‘dot com’ bust.

At the same time O’Reilly had shed his Heinz responsibilities in 2000, become a tax exile in the Bahamas, embarked on some tricky ventures that alienated him from the domestic Irish supporter base who were not already alienated (in an especially Irish way) from a bloke whom they once knew as ‘Tony’,  but who was now insisting that he be  called ‘Sir Anthony.’

O’Reilly’s decision to join with George Soros, the billionaire currency speculator  and others in an asset-stripping exercise at Eircom which enabled him to pocket an estimated €40m was something that tarnished the carefully-manicured O’Reilly image. So much of the public’s money had been lost in the great Eircom public flotation and share splurge in 1999, that anyone who would profit from the telecoms provider in such an overtly opportunist way was regarded as being singularly suspect. That this should be perpetrated by a former Irish ‘Golden Boy’ who now hid behind an English ‘title,’ was simply taking things too far.

Back at INM, a number of important things were happening. The phenomenal growth in titles and in the geographical spread of the company was being achieved by leveraging great heaps of debt. It was becoming clear to the markets that this level of indebtedness could not possibly be sustained. The arrival of Denis O’Brien on the INM share register in the mid-noughties  turned from an annoyance at the outset into a major problem for Tony and his heir apparent,  son Gavin. O’Brien began to criticise operational matters like the scandalous waste of money on the Indie; the subsidisation of the other major loss-making title, the Sunday Tribune  and the  cost to the INM shareholders of the O’Reilly lifestyle, with its  big parties, lavish entertaining of figureheads from the world of politics and maintenance of committees that served only to make Tony look important.

Just at this time, the company rhetoric began to adopt phrases like “INM must become the Ryanair of the newspaper sector”. The consequences of this philosophy were predictable. Agreements with the unions were torn up and significant job losses ensued. One particular change was the out-sourcing of the sub-editing function at the Independent titles to a third party. The danger here was that because sub-editing is a significant item of quality control in newspapers,  the interests of the customers were being downgraded for an accounting manoeuvre. Only a very exceptional amount of cost-cutting was going to change the special problem that was apparent at INM which was its phenomenal debt. By the late 2000s the supporting banks took the initiative themselves and forced the company to come up with a proposal that would turn debt into equity. O’Reilly was diluted and while O’Brien too suffered some dilution, he at least had the cash resources from his mobile-phone activities to restore his holding and now he has effectively wrested the dominant shareholding position at the company. He can change the company and explore more digital ways of turning a profit. But it won’t be easy. It is hard to know if the O’Brien motivation was to take out an especially pompous rival and rub his nose in it. If that was all that was required, Denis O’Brien has hit the target. The task of securing INM with a sustainable debt and an income stream that will satisfy the markets is daunting and the first signal that O’Brien is making progress in this endeavour will be in the share price. As of now the share price is about 96 per cent lower than it was in 2007.