Tony O'Reilly, the company chairman and its largest shareholder, is putting in IRpounds 22m of his own money to keep his holding at roughly 26 per cent. "Yes, it's quite a big underwriting," Dr O'Reilly said yesterday, following the company's annual general meeting in Dublin. But he said it was justified by the growth prospects.
"Effectively we are de-gearing the company," he said. Asked what the company might buy, he said: "It could be the purchase of nationals or regionals in Britain, it could be expansion in South Africa or consolidation in New Zealand or further investment in Australia."
The timing of the rights issue, which coincided with last night's announcement by Pearson that it was selling its regional newspaper group, Westminister Press, fuelled speculation that Independent Newspapers could be a buyer.
Capitalised at IRpounds 600m, the Dublin-based company has seen profits increase fivefold in five years to IR50m, on the strength of an aggressive acquisition strategy.
The rights issue, which will reduce gearing to just 14 per cent from 56 per cent currently, will give the company "much greater flexibility to move quickly when we need to," finance director James Parkinson said.
"We are shown a lot of interesting opportunities, and need to be flexible," he said. "This was a good time to go to the market."
The company owns or co-owns newspapers in Ireland, Australia, New Zealand and the UK, where it holds 46 per cent of the Independent. It has newspapers worth about pounds 1.2bn under administration, and publishes 12 million newspapers a week world-wide. The group has been linked to a number of possible acquisition targets, most recently the ailing Express titles.
Mr Parkinson declined to comment on specific targets, but said the company's interest in the UK was limited to the print sector. Overseas, both radio and television were viewed as attractive, he said, confirming that the company would consider bidding for radio licences in South Africa. Earlier this year, a consortium in which Independent Newspapers was a member bought Radio New Zealand, the privatised radio company.
Mr Parkinson said that both television and radio companies in the UK were "on the expensive side," but that there wereopportunities in overseas markets.
Australia was viewed as the most likely target for future growth. Dr O'Reilly's son, Cameron, is chief executive of Australian Provincial Newspapers, the Independent affiliate company, and has been based in Sydney since 1988.