Crunch time at the Independent - a change at the top, but will it survive?

Ireland's media mogul bows out to save the firm after deal with Denis O'Brien

Hours before the English and Irish rugby teams locked heads in Dublin's Croke Park two weeks ago, there was a "big match" of a very different sort taking place 30 miles from the capital.

Two of the biggest names in Irish business - the septuagenarian media mogul Sir Anthony O'Reilly and the man who has been a persistent thorn in his side, the mobile phone billionaire Denis O'Brien - were meeting for the first time to bury years of public animosity in an effort to save the media empire that owns the Independent and Independent on Sunday.

As a former Ireland and British Lions rugby player, O'Reilly celebrated the home team's 14-13 victory later that day, but the contest played out in his 18th-century mansion in Co Kildare has now seen him retire from the field. Yesterday, Ireland's answer to Rupert Murdoch announced he would step down from the company he has built up over the past 36 years, Independent News & Media (INM), to make way for his son Gavin, who will be the only remaining family representative on a board of directors that is being stripped of O'Reilly supporters.

While he is being given the title of emeritus president when he retires on his 73rd birthday on 7 May, it is the end of a journey that began when O'Reilly bought a controlling stake in what was at the time a local Irish newspaper publisher from the Murphy family, who had owned the group since 1904.

Among those also leaving the board are O'Reilly's biographer, Ivan Fallon, who as chief executive of INM's UK division broke the broadsheet template by launching a "compact" tabloid edition of the Independent.

O'Brien, the richest Irishman in the Forbes billionaires list, made his fortune building Ireland's second mobile phone network in the 1990s. He has been pushing for a shake-up at INM since he started building his 26.1% stake about two years ago. Gavin O'Reilly had dismissed him as a "gnat" he would like to swat but last year his father - INM's largest shareholder, with a 28.5% stake - started to make his peace with him.

"We decided the major shareholders needed to be on the same page," Gavin explained yesterday. "We started talking and it was clear we had far more in common than most people would have thought. The old man and Denis struck up a friendly relationship."

The dramatic reconciliation of the warring factions comes as the credit crunch and worsening newspaper advertising market has left INM facing a funding crisis. Debts at the firm, which publishes more than 200 newspapers and magazines worldwide, including the Belfast Telegraph, top €1.3bn (£1.2bn).

In the past, Tony O'Reilly has been able to bankroll his businesses when they got into trouble, but in January he suffered a shock when one of his prized assets, Waterford Wedgwood, collapsed. As chairman of the fine china and glassware firm, O'Reilly had invested €400m over the past five years along with his brother-in-law, Peter Goulandris, and the private equity fund Lazard Alternative Investments. When the 250-year-old firm went under, taking a sizeable chunk of his fortune with it, O'Reilly realised that the situation at INM had become untenable and he did not have the resources for a bailout.

INM's financial position was made plain on 26 January when the company announced it would be axing its dividend and said it would sell loss-making businesses, widely taken to mean the "for sale" sign had been hoisted above the Independent and Independent on Sunday titles.

Before INM's results and the Waterford Wedgwood collapse, O'Brien and Gavin had met to talk about the future of the business. Talks, however, increased in intensity after INM's results and four days of shuttle diplomacy between London and Dublin this week resulted in yesterday's deal.

O'Brien and Gavin know each other well - having sat on the board of the Irish telecoms company Norkom. They are very different: O'Brien is very much the self-made man - his father made his living from selling veterinary supplies - while Gavin is often seen as living in the privileged shadow of his father.

Much of the talking has been done by Paul Connolly, a refinancing expert who has worked with O'Brien for more than a decade and INM's chairman, Brian Hillery. Initially, the O'Brien camp had been pushing for all four O'Reilly family members - Tony, Gavin and non-executive directors Cameron and Anthony Jr - to leave, but Gavin's attitude throughout the talks persuaded O'Brien that he should stay.

A reconciliation between O'Brien and Tony O'Reilly was crucial to the deal. In the past the O'Reilly camp tried to paint O'Brien as embittered by his attempt, in the dotcom days, to buy Ireland's former state-owned telecoms monopoly, Eircom - which O'Reilly foiled. O'Brien has publicly attacked the way that O'Reilly operated at INM as borderline cronyism.

Today's best video

Today in pictures