Hollinger: Descent into Chaos

29 January 2004

Perhaps a skilled chaos-theorist could predict the outcome of the Hollinger saga, now sliding down the slope of chaos into the abyss of Black farce. Reporters and other lesser mortals might do better to consult a Ouija-board.

These are the latest developments ...

• Billionaire twin entrepreneurs Sir Frederick and Sir David Barclay on Tuesday launched their formal tender for Hollinger Incorporated (H-Inc) with an offer of $8.44 in cash for each ordinary share.

• It is not clear whether the offer is simply for the equity held by Lord Conrad Black or H-Inc as a whole. The Toronto-listed company is the preference share vehicle through which Black controls his publishing empire, holding just 30% of the equity but 73% of the votes in publishing group Hollinger International (H-Intl).

• Meantime, the committee of directors now running H-Intl has accused Black of "breaches of fiduciary duty" and filed lawsuits to prevent him from selling his stake.

• But the Barclays, who run their commercial empire from a fortified tax haven in the nominally British Channel Islands, insist the deal is "irrevocable" despite the objections of the H-Intl board. The also claim it overrides any decision a court may reach about Black's conduct.

• As of Tuesday, the twins have thirty-five days to secure the H-Inc shares from Black's privately owned vehicle, Ravelston Corporation, which has a 78% stake in H-Inc; also to acquire the remaining 22% of shares held mainly by Black's associates. If a deal is not inked at the end of the period, the Barclays have the right either to pull out or extend negotiations.

• In the interim, H-Intl is desperately seeking a court injunction to block the sale. On Tuesday a company spokesman was unable (or unwilling) to speculate when or whether such an injunction might be obtained. Lazards, the investment bank appointed by H-Intl to auction the publishing business's assets (which include the Chicago Sun-Times and Britain's Daily Telegraph), declined to comment.

• Black too has been stumping the courts, seeking to bar H-Intl from selling any of its (or, as he insists, his) assets. But H-Intl has parried Black's legal move with the introduction of a so-called 'poison pill' scheme. This would overturn the preferential voting privileges that enable H-Inc to control the publishing company with just a 30% stake. If enacted, it would thwart the Barclays if they succeed in bulldozing the deal through.

Both the warring parties regard the other's actions as illegal.

Data sourced from: Telegraph.co.uk; additional content by WARC staff