Investors Cynical That Black Will Loosen Grip on Hollinger

06 June 2003

Lord Conrad Black of Crossharbour may not keep his promise to divest himself of between five and ten million shares in Hollinger International – as he undertook to do at the group’s annual meeting two weeks ago [WAMN: 23-May-03].

The undertaking, declared by the noble lord to be “a win for everyone”, was seen as a signal that Black was prepared to relax his personal stranglehold on Hollinger. But even though the word of a (recently) British gentleman is his bond, some of his listeners are far from convinced that action will follow words.

Especially Christopher Browne, managing director of Tweedy Browne. His investment firm holds an 18% stake in Hollinger and is threatening legal action over $73 million (€61.71m; £43.78m) in extra-curricular fees pocketed by Black, his wife and other senior Hollinger honchos, instead of entering company’s coffers.

Says Browne of Black’s promise to sell: “If I were a betting man, I’d bet that it doesn't happen. Maybe it's something he did to stave off rebellion at his annual meeting. There are a million ways for anyone to get out of the deal.” [And if the boss of a private investment company isn’t a betting man, then who is?]

The doubts about Black’s intentions are not mere cynicism. Technically, the shares are not his to sell, being held as collateral by bondholders of ultimate parent company Hollinger Incorporated.

Another doubter is the investor to which Black promised his shares, Southeastern Asset Management, currently Hollinger’s largest institutional shareholder. Said Southeastern’s general counsel Andy McCarroll on Thursday: “There is no guarantee that the deal will be done, but it is something we are actively working to make happen.”

McCarroll views Black’s promise to sell as “an unprecedented undertaking” to democratize Hollinger’s structure – but observed that it is still in the hands of lawyers who are “digging” through a mountain of paperwork to check if such a sale is possible.

On the thorny question of the ownership of the contested $73 million in fee payments, Hollinger’s board is said to be close to hiring an independent adviser and legal counsel to aid the investigation.

Data sourced from: Financial Times; additional content by WARC staff