THE chairman of Independent Newspapers, Dr Tony O'Reilly, has spent Pounds 3.4 million to exercise options over 3.25 million Independent shares, a move that brings his shareholding back above 27 per cent.

Dr O'Reilly's equity interest in Independent fell below 26 per cent after he decided to take up just 78 per cent of his share allocation in the recent rights issue for Pounds 23 million.

At the time, it was indicated that the chairman planned to bring his stake back above 27 per cent through exercising share options. Those 3.24 million options were exercised on Tuesday.

Buying the 3.24 million shares at various option prices between 80p and 131p cost Dr O'Reilly Pounds 3.46 million, but the shares are worth over Pounds 9.1 million at the current Independent share price of 280p.

In effect, Dr O'Reilly has maintained his stake in Independent at 27.1 per cent, but has made a paper gain of over Pounds 5.5 million through the use of options to buy shares rather than take up his full entitlement of shares in the rights issue.

Meanwhile, Independent continues to be mentioned in Britain as a potential bidder for Westminster Press, the British regional newspaper group being sold by Pearson.

The suggested price of Pounds 350 million sterling is not prohibitive given Independent's post rights financial strength, but sources in Dublin insist that Independent is more likely to focus its financial muscle on Australia and New Zealand - and in particular on the shareholdings in APN and Wilson & Horton held by the O'Reilly family trust - at a projected cost of more than Pounds 1 50 million.

For the same reason, sources have discounted suggestions that Independent might buy out Mirror Group Newspaper's 46 per cent stake in the loss making Newspaper Publishing.

Independent already has a 46 per cent interest in Newspaper Publishing and chief executive, Mr Liam Healy, is chairman of the British company.