Lord Black poised to thwart sale of Telegraph

Winning bid for newspaper group is due to be selected this week, but disgraced peer could delay the deal. Tim Webb reports
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Lord Black of Crossharbour is threatening to block the sale of The Telegraph Group, which should finally be announced this week.

Lord Black of Crossharbour is threatening to block the sale of The Telegraph Group, which should finally be announced this week.

The disgraced peer is demanding that the board of parent company Hollinger Inter- national seek shareholder approval before selling The Daily Telegraph, Sunday Telegraph and The Spectator magazine.

Lazard, the investment bank handling the sale, will spend this weekend reviewing the three remaining bids for the titles. These are from the Barclay brothers, owners of the Ritz Hotel and Scotsman newspaper; the Daily Mail owner DMGT, which is mounting a joint bid with private equity group CVC; and rival private equity group 3i. The three parties submitted final bids last week.

The Lazard team will hold face-to-face meetings with all three sets of advisers early this week. It is rumoured that Lazard has already told DMGT and CVC, which only joined forces 10 days ago, to raise their offer, possibly because the Barclay brothers have increased the value of their bid.

A winner should be announced this week and the titles should fetch almost £700m.

But the sale - which has taken six months to negotiate - could be further delayed. Through his holding company, Hollinger Inc, Lord Black is still the largest shareholder in Hollinger International and holds majority voting rights. The newspaper group, which also owns The Jerusalem Post and Chicago Sun-Times, says that it does not need to hold a shareholder vote before selling The Telegraph Group.

But a source close to Lord Black refused to rule out going to court to block a sale if no vote is held. "It depends on what the transaction is proposing. We certainly don't think it's clear that they can clear the sale without shareholder approval."

The source said Lord Black could oppose the sale if he does not think it represents value for money. Because Lazard is selling off assets separately, rather than the whole company, Hollinger International could be liable for capital gains tax of up to £200m from the sale of The Telegraph Group.

More importantly, Hollinger International has not said how it will distribute the proceeds from the sale. There have been suggestions that the cash owed to Lord Black could be placed in an escrow account until lawsuits against the peer are settled. Hollinger International has claimed $1.2bn (£660m) in damages against Lord Black in a racketeering lawsuit.

According to Delaware law, where Hollinger International is incorporated, shareholders have the right to vote on the sale of a company's assets if it represents "all or substantially all" of the company.

Because the group has a market value of around $1.5bn, lawyers said that it would be difficult for Hollinger International to claim it did not need shareholder approval.

John Jackson, a partner at legal firm DLA, said: "I would be surprised if there was not a shareholder approval on the sale.

"When Hollinger International announces the sale, I can't imagine they will do so without proposing what to do with the proceeds. If they say they will delay distribution of the proceeds without good reason, this could be grounds for Black to try to force the company's hand over how it distributes the proceeds."

Judge Leo Strine extended a Delaware injunction last week banning Lord Black from interfering in the sale process - for example, by selling his stake. But, explaining his decision to order the board to give him key financial information on the sale of The Telegraph Group, he added: "There's a reality here that can't be escaped. Hollinger Inc controls a majority voting block of International. Mr Black is a director ... at some point he's got to get what he's entitled to as a director."