FT’s take on the APN boardroom battle most nuanced to-date

Financial Times: A boardroom battle has broken out at APN News & Media following a decision by the company’s largest shareholder to push for the removal of its chief executive and oppose a rights issue.

Shares in the Australasian media group APN were suspended on Friday when Ireland’s Independent News & Media said it wanted the removal of Brett Chenoweth as a director and CEO.

INM’s largest shareholder is telecoms billionaire Denis O’Brien, who seized control of the Irish media group last year following a boardroom coup that forced out former INM chairman, James Osborne.

APN, which owns newspapers and radio stations in Australia and New Zealand, hit back at INM, accusing it of trying to prevent it from going ahead with a rights issue that would dilute INM’s shareholding in APN.

“APN is investigating these comments, but believes these comments arise from the fact that APN is considering a pro rata capital raising,” the Australasian media group said in a statement.

APN said the non-INM representative directors of APN unanimously supported Mr Chenoweth in a statement.

APN’s board was due to decide whether to go ahead with a rights issue at a scheduled meeting on Sunday ahead of its 2012 results, which are announced on Thursday. APN has contracted Macquarie Capital to advise on the capital raising proposal.

INM strongly opposes a capital raising because the cash strapped group would find it impossible to participate, leading to a dilution in its stake in the company. INM has net debts of €426m, four times its earnings before interest, tax, depreciation and amortisation.

INM put its South African operations up for sale last year in an effort to raise cash to pay down its debt but has so far been unable to conclude a deal.

INM has attracted support for opposing a rights issue from APN’s second largest shareholder fund manager Allan Gray.

Simon Marais, managing director of Allan Gray, which owns 19 per cent of APN, told The Weekend Australian newspaper that a potential capital raising was a “crazy thing to do”.

“A capital raising would certainly not get our approval,” Mr Marais said. “The share price is very low and there is no danger of capital breaches. The company has always had good cash flow and they bought some assets some time ago.”

Mr O’Brien owns 3 per cent of APN shares personally, further strengthening his hand in the boardroom battle.

The shareholder revolt at APN is a blow to Mr Chenoweth, who became chief executive of APN in January 2011. It is also a major test for Peter Hunt, APN’s new chairman, who joined the company last September. Mr Hunt took over from Gavin O’Reilly, former chief executive of INM.