Telegraph Sale -- Will Black Block?

25 June 2004

Lord Conrad Black has a multitude of reasons to be doleful, not least the tax liability incurred by Hollinger International [H-Intl] on its sale earlier this week of Britain's Telegraph Group.

Although there are other reasons why he might try to block the sale of the company to the Barclay twins, the desire to avoid capital gains tax is the most likely motivator.

His Lordship, as H-Intl's ultimate controlling shareholder, will bear the brunt of the tax bill -- which could have been avoided in its entirety had H-Int been sold to the Barclays as a single entity, a move in which Black was thwarted by legal injunction earlier this year [WAMN: 16-Mar-04].

The peer's holding company Hollinger Incorporated [H-Inc] on Wednesday issued a statement railing against the valuation of the Telegraph assets and the likely tax implications.

"Hollinger International must provide its shareholders with sufficient information to evaluate properly this transaction in light of alternative opportunities available to the company," insisted H-Inc. "Allowing for currency fluctuations, this is essentially the same valuation that the Barclays put on these assets back in January."

The courtly cavil continued: "A sale of the Telegraph and Hollinger International's other UK businesses involves the bulk of the company's assets and therefore clearly requires approval of the company's shareholders."

But Black is currently barred from "interfering" in the sale of H-Intl assets under the terms of an injunction granted in Delaware by Judge Leo Strine [WAMN:21-Jun-04]. The injunction expires at the end of October. The sound of legal lip-smackin' can already be heard!

• Meantime, the management of the newly sold Telegraph Group is making reassuring noises to its top advertisers and agencies, promising a new dawn of commercial stability.

Among the assurances given is that there will be no costly launch in the immediate future of a tabloid version of its broadsheet newspapers. Nor will there be any immediate changes in senior management, group managing director Hugo Drayton told ad trade weekly Campaign.

The stress here is on 'immediate'. Some change, Drayton conceded, would be unavoidable after a three to six months "getting to know you" interval. A statement that may reassure advertisers but will do little for morale in the executive washroom.

Worse yet, looming over boardroom and newsroom alike is the spectre of former Sunday Times editor Andrew Neill, who currently runs Press Holdings International, the vehicle through which the Barclay twins control The Scotsman and The Business newspapers ... and now the Telegraph properties.

There is speculation around the media parish pump that Neill has editorial ambitions and sees the acquisition as a platform from which he might settle old scores with his former boss Rupert Murdoch.

Neill, who also doubles as a TV pundit on media matters, is reputedly an interventionist editor, whose style could rapidly ruffle feathers within the Telegraph establishment.

Data sourced from: BBC Online Business News (UK) and BrandRepublic (UK); additional content by WARC staff