Hollinger Hit By Another Double Whammy

19 December 2003

Dame Fortune continues to frown on Lord Conrad Black's beleaguered media fiefdom, Hollinger International.

The reeling group was again attacked by its persistent nemesis, New York investment firm Tweedy Browne. In a letter obtained by The Times of London, Tweedy's managing director Christopher Browne accuses Gordon Paris (who replaced Black as Hollinger's chief executive) of acting "inappropriately" in his Lordship's interests.

Browne is displeased that efforts to resolve the group's cash crisis have focused on the sale of Hollinger International's closely-held parent, Hollinger Incorporated -- which Browne believes is a stratagem to allow Black (who remains chairman of both companies) to get away with "shopping" Hollinger.

His letter to Paris continues in angry vein: "Is this the purpose for which you and the board of Hollinger International engaged Lazard, to act as personal banker for the controlling shareholder alone?

"Any transaction involving Hollinger Inc alone is to the detriment of Hollinger International shareholders, as it would transfer control of our company in a transaction not open to all shareholders."

Black has recently been in abortive discussions with a number of investors over a possible sale of Hollinger Inc -- most recently, New York private equity firm Hicks Muse Tate & Furst.

Browne also demands that Paris justify Hollinger's continued payments to Black and other corporate liegemen (all of whom resigned last month), "when most of the principals … cannot perform their obligations."

• In a second blow to Black, Canadian media group CanWest Global Communications on Thursday issued a writ against Hollinger International for C$25 million ($18.75m; €15.09m; £10.58m) in respect of alleged non-payment of monies due after CanWest's purchase in 2001 of the National Post newspaper.

The money relates to an agreement over future losses, interest payments and the running and capital costs of the partnership up to August 31 2001. By strange coincidence, it is precisely the sum owed by CanWest to Ravelston, a private investment vehicle controlled by Black.

Repayment of the obligation would be triggered if Ravelston terminated a management services agreement under which it receives C$6m a year from CanWest.

Complicated, huh? Doubtless his Lordship can make sense of it. And so, bemused investors hope, will the US Securities and Exchange Commission, currently taking a close interest in Hollinger's tangled affairs.

Data sourced from: Times Online (UK) and Financial Times; additional content by WARC staff