‘Do you not get it lads?’: Who said what in INM’s aborted Newstalk purchase

Texts from the businessman Denis O’Brien 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 show.

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, 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.

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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 then chief executive Robert 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]”.

Updated valuation

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 management 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.

Rigorous debate

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.

Inconsistent

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.