Mediahuis had the INM takeover nailed down before breakfast

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Mediahuis had the INM takeover nailed down before breakfast


Mediahuis chief executive Gert Ysebaert and chairman Thomas Leysen. Photo: Photo: Tony Gavin
Mediahuis chief executive Gert Ysebaert and chairman Thomas Leysen. Photo: Photo: Tony Gavin

The speed with which Belgian newspaper publisher Mediahuis moved to nail down its proposed takeover of Independent News & Media (publisher of this newspaper) took some by surprise. It was all over before breakfast.

The company has newspaper and online publishing assets in Belgium and the Netherlands, and already looks pretty much over the line having secured the backing of Denis O’Brien and Dermot Desmond, who together held almost 45pc of the company. While some shareholders at the AGM were unhappy that INM was being sold too cheaply, the price has to be seen in the context of unknown costs relating to the legacy issues being investigated by High Court inspectors.

Big challenges remain, from that ongoing probe, to taking the plunge on a paywall for digital editions of newspaper titles. Mediahuis has the advantage of being a privately-owned company with the experience of successfully making the transition to digital paywalls. It doesn’t look like it is in it for a quick buck, but is more likely to be a long-term player.

The inspectors’ investigation will drag on, but for the prospective new owners it is a matter of putting a number on the possible cost and finding a way to balance management’s time between this legacy issue and important decisions about the future.

The takeover should usher in a new era for the company, but it will also see it disappear from the stock exchange where it floated in 1973. On that front, the last few weeks have seen other imminent departures from the exchange. Last month financial services firm IFG Group said it had agreed a takeover offer from UK private equity firm Epiris. IFG listed in Dublin in 1996.

Just a few weeks later, Green Reit surprised the market by saying it was effectively putting up a ‘for sale’ sign and exploring options for bidders for its assets or the company itself. Either way it is likely to lead to it de-listing from the exchange.

The imminent takeover of INM becomes number three in less than two months.

And others may well be on the way. Datalex is now attracting the dreaded word ‘troubled’ before its name appears in newspaper headlines after announcing during the week that its chief executive Aidan Brogan has quit with immediate effect.

Its biggest shareholder, Dermot Desmond, has shored things up by effectively making €10m available to the company through new equity and a loan. But three senior departures in a row are significant.

Brogan becomes the third of the top three executives in the firm to leave. Chief financial officer Donal Rooney said in February he would be leaving. Just over a week ago, chairman Paschal Taggart announced his departure from the firm, and this was closely followed by Brogan.

Deputy chairman and experienced hand Sean Corkery has stepped into an executive role. The hunt may be on for a new CEO but given the findings of accounting irregularities, and the loss of a CFO, CEO and chairman, it will be a long, hard road to rebuild both the business and investor credibility.

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A break-up or takeover could be on the cards here if potential buyers can be satisfied that there aren’t any more skeletons in the cupboard. PwC did an investigation and didn’t find any. The departures look more like part of an internal blame game.

On the other side of the IPO equation, there are still lots of candidates keen to float on the stock market. The Irish Stock Exchange, now owned by Euronext, makes most of its money through listed funds these days.

But in 2017 it ran an 18-month programme to attract more listing candidates, called IPOready. Executives from 12 different companies did the course.

Hopefully graduation will lead to flotation.

Tax policy will not be an issue for the new Central Bank boss

It seemed more than a little ironic that the next governor of the Central Bank, Gabriel Makhlouf, highlighted “harmful” Irish tax practices a number of years ago when he was in a different job.

He was former chair of an OECD committee on fiscal affairs when it published a report accusing 19 country members, including Ireland, of operating potentially harmful tax regimes.

It is only when you look at the findings of the report and the fact it was nearly 20 years ago, you can see what a relatively tame affair it was, given what has been exposed about Irish facilitation of tax avoidance since then.

The report included Ireland as one of 19 countries that were at it. Spreading blame that widely blunts the arrow of criticism. The report highlighted practices mainly related to the IFSC at a time when companies there paid 10pc corporation tax and others paid 24pc. Only in the intervening years since that report did we become fully aware of complex facilitation of tax avoidance structures from the double Irish (which had to be abolished) to inversions and later, of course, the EU Commission finding out about Apple’s paid tax rate.

The main issue around the Apple case, irrespective of whether it was technically illegal State aid or not, is how Ireland facilitated tax structures which meant some companies did not have to pay tax anywhere.

That, along with several other “rinky dinks”, has been ended.

Makhlouf will not have to trouble himself with these matters in the new job. But he will be busy with mortgage lending rules, banking culture and the possible impact of higher interest rates into the future.

The Central Bank produced research during the week which showed the level of exposure banks had to property lending was worrying compared with the height of the boom.

The focus now is more on residential than commercial property lending, and the banks will argue it is on a more responsible basis. Plus, their loan books are a lot smaller.

Nevertheless, around 70pc of lending balances are property related. Banks remain vulnerable to severe property price corrections.

Will Makhlouf believe this should be remedied? We await with interest.

Bombardier drops a bombshell on its worried Belfast workforce

It has been a bad week for the 4,000 or so Northern Ireland employees at aerospace giant Bombardier. The parent company said it plans to sell its Belfast operations.

Brexit was hardly the cause, given Bombardier group’s wider challenges to cut costs and restructure. However, Brexit uncertainty was probably a factor in the discussions about the future for the operations at four different plants in the Belfast area.

The company came out in favour of backing United Kingdom Prime Minister Theresa May’s Brexit withdrawal deal (backstop and all) earlier this year.

Bombardier’s northern operations have a future as an outsourced manufacturer for the Canadian parent group, so jobs are safe. The question is how many.

The business has huge investment and skills built up over a very long time. Bombardier in the North was formerly Shorts, which had been around since 1936.

When it comes to outsourcing, price is the big factor and the pressure to continually cut costs on contracts is very real.

Deliver the next contract more cheaply or lose the gig is very real for outsourced manufacturers.

Bombardier in the North does work for other companies, outside the parent group, but accounts for the Belfast-based division show this declined sharply in 2017 from $206m (€184m) of revenues in 2016 to $146m the following year. Work for Bombardier generated $536m in 2017.

The other big issue for staff is pay, pensions and conditions. Bombardier was seen as a model employer. Average pay in 2017 was €51,497 per employee, when the average pension contribution of €12,205 is included.

The workforce is almost exclusively on a defined benefit pension scheme.

Bombardier has been reducing headcount for a couple of years, with 1,080 redundancies in 2016. Average severance was €41,450.

Headcount was reduced by another 375 in 2017, with an average severance cost of €52,757. Uncertain times for a business that accounts for 8pc of Northern Ireland GDP and 40pc of its manufacturing output.

Sunday Indo Business