City ready to fight Black

INSTITUTIONAL shareholders in The Telegraph, Conrad Black's UK newspaper company, have warned they will not be sold short by the tycoon if he goes ahead with plans to take the company private.

One shareholder said he would be looking for Mr Black to offer a price of at least 500p per share, against a closing price on Friday of 436p.

"He's already aggravated the City once by selling stock just before the announcement of the Daily Telegraph's cover price cut," he said. "We're in no mood to let him buy the shares back on the cheap just as there are signs that the newspaper price war may be coming to a close.'' Others, who also declined to be identified, voiced similar views.

Mr Black surprised the City last week with his announcement he planned to buy back the 48.5 per cent of the group he does not already own. The Telegraph was floated three years ago at 325p.

The Telegraph's minority shareholders include powerful UK institutions such as the Prudential, Henderson, Newton Fund Managers and Perpetual. The group's 12 independent directors, who will be advising them whether to accept any offer, are themselves being advised by NM Rothschild, banking adviser to The Telegraph.

City analysts say that Stephen Grabiner, The Telegraph's managing director, told them last week that Mr Black recently had a half-hour meeting with Rupert Murdoch, the head of News International, which Mr Grabiner described as "convivial'. Mr Murdoch has recently hinted that, partly because of the rise in newsprint costs, he sees cover prices rising again after a period of the most cut-throat price competition ever seen in the industry.

"There is no doubt in my mind that the UK price war, which so drastically hit The Telegraph share price last year, is close to coming to an end," said one analyst. "Then we could see the share price lifting off."

Mr Black has so far not given any idea of the price he is considering offering to shareholders, although analysts have said that anything less than 450p would be bitterly opposed, and that only if an offer was above 500p would it begin to look attractive.

At the end of last year Mr Black agreed an option to buy out the 7 million shares (5 per cent) still held by the Berry family, the former owners of the newspaper, at 450p.

As shareholders discussed Mr Black's intentions, there were also rumours that Kerry Packer, the Australian entrepreneur, might purchase shares in The Telegraph. Mr Packer and Mr Murdoch have both been buying shares in Fairfax Group, the Australian publisher controlled by Mr Black. "At this stage, Mr Packer could cause some problems for Mr Black if he wished to," one source said.

Mr Black's plan has revived the debate about his relations with the City. Last May, his sale of £59m of shares at 587p was followed a month later by a cut in the cover price of the Daily Telegraph to 30p and a 40 per cent fall in the company's share price.

Although Mr Black was cleared of any wrongdoing by the Stock Exchange, Cazenove, resigned as the company broker.

If the bid goes ahead at around 500p, six Telegraph directors, including editor-in-chief Max Hastings, would make more than £1.5m from share options.