When an ambitious media mogul is forced to put a prize asset on the market, you know they they are in trouble and close to the edge.

And so it is with Sir Anthony O’Reilly, the many who once stalked Fairfax, settled for second prize in APN News and Media, and has now put the 39% stake in APN on the market to slash debt at his Irish company, Independent News and Media.

O’Reilly had a temporary ambition to be the dominant newspaper owner in Australia: his former wife was Australian, as were some of his sons and he pushed that to the limit to try and snatch Fairfax, but was beaten by the now disgraced Conrad Black.

No longer: in a statement to the London Stock Exchange on Friday night, INM revealed it had received “unsolicited offers” for its 39.1% of APN. At the same time, INM revealed an earnings downturn, big job cuts, especially at the Independent in London where 10% of the staff will go, and forecasts of lower revenues this year and in 2009.

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INM’s statement will test market appetite for old fashioned media assets at a time when they are on the nose around the world.

O’Reilly is under pressure: he has 28% of INM, a rival Irish billionaire, Denis O’Brien has built a 26% stake and is making life tough. Debt is too high and needs to fall as the credit freeze crunches all overleveraged companies: hence the decision top put the best assets in INM on the market.

The announcement of the willingness to sell will see APN shares rise sharply from Friday’s close here of $2.41. That was up six cents on the day, not the move of a share in play.

APN is Australia’s other (after Fairfax) regional newspaper group, and has a half interest in the Australian Radio Network with Clear Channel of the US.

It is also the other major newspaper publisher in NZ (again, with Fairfax the major rival) and has significant radio interests as well. It also has a major outdoor advertising business.

A price wasn’t mentioned by INM in its statement: it merely said that it had received a number of approaches for the APN equity stake and that its disposal of that holding is expected to reduce its debt by 800 million euros or $US1.01 billion, or around $A1.5 billion. INM needs to find 200 million euros to refinance a bond issue falling due early in 2009.

In late 2006, INM offered $A1.9 billion to buy the 60% APN it didn’t own. That was at $6.20 a share.

At Friday’s close of $2.41 the company had a total market cap of $1.18 billion. INM is clearly expecting to get a substantial premium, something that is hard to see, even with the slight recent slight thawing in the credit freeze.

The figures contained in the statement for the debt reduction from the sale, of around 1.5 billion, is more than what APN is valued at, so the cost per share in any deal would be more than double the $2.41, which is hard to see at the moment.

But if sold, the money raised would help cut INM’s debt by more than half, a move that would satisfy some dissident shareholders in INM and analysts in London.

At the same time as revealing the unsolicited approaches, INM revealed staff and other cost cuts aimed at reducing operating costs and improving profits at an time of declining sales and advertising revenues.

The news sent the shares surging 27% in London Friday night, in spite of INM also unveiling a profits warning and significant job cuts across the group including at The Independent and The Independent on Sunday. The most logical buyers are trade as private equity funds are battling to obtain finance for deals already planned. But at the price suggested in the statement from INM, even the most cashed up buyer would be wary, given that Australia’s economy if expected to further slow next year, with ad revenues forecast to be down across the board for all types of media.

So local Australian media groups might be the most logical buyers: Fairfax Media can’t be one because of its already extensive Australian and New Zealand newspaper and radio interests; News Ltd, part of Rupert Murdoch’s News Corp, might fancy its chances, but the purchase of the FPC local papers and magazines in Sydney 18 months ago would make it very tough. Mr Murdoch helpfully pointed out how News was restricted by competition laws in a story in today’s Australian newspaper.

Macquarie Media Group may have been interested, but it has run into problems with investors over its huge debts. It’s regional TV business for the Ten Network would fit with the APN papers, but not radio, which would have to se sold in some centres. That might be tough in the current climate.

The Seven Network might be interested: it still has a fair bit of cash from its deal with private equity group, KKR, but there are question marks about the precise level of debt involved. Whether Kerry Stokes, the controlling shareholder in Seven Network, would be interested in paying a big premium to Tony O’Reilly and his family, is another thing. Stokes is stalking West Australian newspapers and will be at this week’s board meeting in Perth.

How about son Cameron O’Reilly leading group of investors through his Bayard Holdings group, which includes Kerry Stokes? That way the stake will remain in the family, and among “friends”.

INM thought might accept a lower price because its under enormous financial pressures. INM warned on Friday that group net profits, excluding exceptional items, could fall as much as 17% in 2008 on the back of weaker advertising and a slowing global economy. Diluted earnings per share would be down 20% to 23%. Revenues are expected to be 2% or more and lower next year. the cost cuts are aimed at chopping 50 million euros from its cost base, plus the savings from the lower interest bill.

Here’s what it said in its statement the sale idea:

Independent News & Media PLC [“INM”] has received a number of unsolicited expressions of interest in respect of its 39.1% shareholding (representing 191.5 million shares) in leading Australasian media company, APN News & Media Limited [“APN”].

INM has been a shareholder in APN since 1988 and continues to believe that APN possesses a unique and valuable collection of high-quality and market-leading publishing, radio and outdoor advertising assets. While INM continues to be fully supportive of APN and its management team, it has received unsolicited approaches regarding its stake in APN and believes it is now in the best interest of INM shareholders to consider its strategic options.

The Board of INM believes that APN’s current share price does not reflect the inherent value of the underlying assets and the position of APN as a leading media company in Australia and New Zealand. Moreover, this strategic value has not been fairly reflected in INM’s share price, due primarily to the fact that INM doesn’t fully control APN’s cash flows.

As a result, the Board has formally informed APN of its intention to explore opportunities to monetise its significant shareholding.

The INM Board believes that the significant proceeds receivable from monetising its shareholding in APN would substantially enhance INM’s balance sheet and would be earnings neutral for 2009. The Board believes the proceeds could be better utilised for the benefit of all its shareholders by substantially lowering INM’s net debt, with subsequent flexibility to assess other global investment opportunities. Following a sale of APN, INM’s net debt is expected to fall from its current level of approx. €1.4 billion to under €600 million.

Goldman Sachs International, in conjunction with ANZ Mergers & Acquisitions, have been appointed as INM’s advisers. Further updates on this process will be provided to shareholders as required.