Lord Black to give evidence to defend sale of Cayman Free Press shareholder

Tuesday, February 24, 2004

Media mogul and British Lord Conrad Black was set to testify in Delaware Chancery Court last week in defence of his right to sell his controlling interest in Cayman Free Press shareholder, Hollinger International, to British investors Frederic and David Barclay without interference from the Hollinger board.

The Barclay twins, owners of Press Holdings International Ltd and a string of hotels, are trying to dodge the crossfire in the court battle brought by the Hollinger board against Lord Black, and get on with their original plan to acquire the Daily Telegraph of London, which, along with the Jerusalem Post and the Chicago Sun Times, is part of the Hollinger media empire.

On 28 January, the twins began a 35-day, $328 million tender offer for all shares of Hollinger Inc, a publicly traded affiliate which is 78 percent owned by Lord Black and five other investors and which in turn owns 30 percent of the shares but 73 percent of the voting interest in Hollinger International.

If the offer succeeds, the public shareholders will get about 22 percent or $72 million of the offering, and the Black group about $256 million.

"We're trying to complete this acquisition and look forward to being contributive and successful managers of wonderful businesses," said Barclay attorney Robert Zimet of Skadden Arps.

"They don't consider themselves a threat to anyone," he told AFP during a break in the trial. 

The Barclays are intervenors in the lawsuit because they wanted "to make sure the Court is aware of our worthwhile objectives which are getting caught in the crossfire between Lord Black and others. Nobody has accused the Barclays of doing anything wrong," said Zimet.

Hollinger director Raymond Seitz, a former ambassador to England, agreed. When asked under cross-examination by Barclay attorney Christopher Malloy about the brothers' business reputation, Seitz said he had never heard anything negative.

"On the contrary. You have to like somebody who owns the Ritz Hotel," he said.

Hollinger has asked Vice Chancellor Leo Strine of the Delaware Chancery Court to block amended by-laws proposed by Black that would shield the sale of his stake from interference by the board.

The Board also wants the judge to validate its right to implement a shareholder rights, or poison pill plan, that would have the effect of making it prohibitively expensive for anyone to buy Hollinger without the board's approval.

At issue is whether under Delaware law the power of a controlling shareholder trumps the fiduciary duty owed by directors of public corporations to all shareholders.

The Hollinger board has also sued Black and three former Hollinger Inc executives in a New York federal court seeking to recover $200 million allegedly taken through the unauthorised transfer of funds, for altering company books and records to "conceal such actions" and failing to disclose material information in government filings, according to court documents.

Hollinger's Delaware suit claims that Black owes the company $7.2 million in unauthorised payments to himself, and contends that the board's plan to restructure the company by selling some or all of its assets and by changes in management will be seriously impeded if Black is allowed to sell his stake independent of the plan.

Black had agreed in November not to sell his Hollinger shares unless he faced a serious default, and also to repay $850,000 of the $7.2 million he received in noncompetitive agreements by year-end.

In his counter suit, he now says there is no obligation to do either because the directors of the company he founded more than 30 years ago coerced him into making the agreement.

Judge Strine said he would rule by 27 February, before the proposed 2 March closing date of the Barclay offer.

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