Hollinger Tax Ploy Could Save Britain's Telegraph Group

03 December 2003

A tax-efficient stratagem proposed by Hollinger International shareholder Cardinal Capital Management could have a useful side-benefit -- deterring the pack of predators circling Britain's Telegraph Group, said to be the jewel in Hollinger's crown.

CCM, which holds some 2.6% of Hollinger's equity, is urging the cash-strapped company to spin-off its Chicago Group unit, publisher of the Chicago Sun-Times and more than 100 local newspapers. The CCM plan values the unit at around $600 million (€501.74m; £349.0m) -- over half Hollinger's total market capitalization of $1.1 billion.

Once devolved, Chicago Group would be sold, most likely to a trade buyer. This strategy exploits recent changes in US tax law which would accord tax-free status to the demerger even though the company was then sold-on. This investor-friendly concession would minimise tax liabilities for Hollinger International's stockholders.

It would also remove all pressure to sell the rest of the group's assets (including Telegraph Group) under fire sale conditions. Good news for Hollinger, its staff, shareholders, Lord Conrad Black, et al.

But bad news for Telegraph Group's reported predators such as top shelf tycoon Richard Desmond, bargain basement baron Mohamed Al Fayed and the noble house of Rothermere.

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