Hollinger International to Weigh Options After Sale
Hollinger International Inc. will hold an emergency meeting today to weigh its options after media mogul Conrad Black agreed to sell his controlling stake, a source close to the situation said.
“The big issue is should they fight this or not,” the source said Monday.
Black announced a surprise deal Sunday to sell control of his scandal-ridden newspaper business to David and Frederick Barclay -- 68-year-old identical twins who own the Ritz Hotel in London and the Scotsman newspaper -- hours after he was sued by his own company for $200 million and sacked as chairman.
The deal still may be blocked by separate lawsuits filed against Black by the company, the U.S. Securities and Exchange Commission and a private investor.
Black resigned as chief executive in November after the board uncovered $32 million in unauthorized payments to him and other executives -- payments Black now says were authorized, based on new evidence he says he has found.
The Barclays agreed to buy from Black a 78% stake in Toronto-based holding company Hollinger Inc., which in turn controls 73% of Hollinger International voting shares.
The stock of Hollinger Inc. soared nearly 90% in Toronto trading Monday but fell short of the bid price on doubts the deal will succeed.
“What the market is saying is, ‘We don’t believe it,’ ” said Ronald Mayers, a principal with Montreal-based hedge fund Genoa Capital Inc., which specializes in merger arbitrage.
“There are a lot of things that could keep this deal from getting done.... The Barclay brothers are smart, they want this, but at some point it may become so hairy and so difficult that they can’t get it done.”
Hollinger International’s board will consider its options at today’s meeting, but it is not clear whether it can stop the deal. Hollinger Inc. is a separate company, and because it is based in Toronto, it may be beyond the reach of U.S. regulators.
British regulators and competition authorities might have some oversight because the deal would constitute a change of control in the Telegraph, England’s bestselling broadsheet newspaper.
Hollinger International declined to comment.
The SEC’s lawsuit makes Richard Breeden -- a former SEC chairman who is heading an investigation by the Hollinger International board -- a special monitor if the investigation is impeded. But it was not apparent Monday whether the Barclays’ purchase would trigger that clause or whether Breeden would be empowered to block the deal.
