The independent committee reviewing plans to reorganise the Telegraph group is holding out for a higher offer for minority shareholders before recommending the deal, according to sources close to the company.
In addition, they are seeking assurances that the offer can be fully financed before making any public comment on an eventual offer.
The complicated reorganisation would see shares in the Telegraph, controlled by Conrad Black's Canadian holding company Hollinger, sold to another Hollinger vehicle in the US, American Publishing. Hollinger has said it would tender its stock, representing 58.5 per cent of Telegraph's common shares, in exchange for shares in American Publishing. Minority shareholders would be offered shares or cash.
As part of the reorganisation, Mr Black's US and Australian holdings and a block of shares in Southam Inc, a large Canadian publisher, would be transferred to American Publishing.
The reorganisation is further complicated by Hollinger's ownership of both the selling and buying vehicles. Hollinger has a 64 per cent equity interest and a 97 per cent voting interest in American Publishing.
As a result, the cash price suggested by Hollinger, thought to be between 460p and 480p a share, would have to be approved by independent committees at both American Publishing and the Telegraph group.
Mr Black recently enraged members of the independent committee, as well as Telegraph institutional shareholders, by telling the Independent on Sunday that the price would be "nowhere near" 500p. The shares were trading yesterday at 449p, well below the 600p-plus range of last year, before the Telegraph joined the circulation price war.
The Telegraph's independent committee, chaired by Lord Swaythling, chairman of Rothman International, is believed to be pressing for a sweeter offer. One suggestion, thought to have come from the independent committee's advisers, Rothschilds, would see investors sell their Telegraph shares at a level close to Hollinger's suggested price but still receive the next scheduled dividend payment, due in October. Last year, investors were paid 7.5p a share in the comparable period.
The committee's advisers are believed to have put a much higher valuation on the shares, well in excess of 500p. A source close to the deal said the value of Telegraph's 20 per cent holding in John Fairfax Holdings, the Australian media group, and the 15 per cent holding in Southam would be "fundamental" to arriving at a final price.
Other valuation issues include the future course of the price war and the likely effects of rising newsprint costs on Telegraph's profits.
Hollinger insiders concede the difficulty of arriving at a price. "American Publishing clearly wants to negotiate the lowest price it can for the shares, while Telegraph shareholders want the best price they can get," a senior Hollinger executive said.
Hollinger hopes the Telegraph committee will make its recommendation by 10 May, although the independent committee may take much longer.
American Publishing's independent committee, chaired by Richard Pearle, is still reviewing the terms of the offer. David Dodd, the company's chief financial officer, said "the two processes are co-ordinated", suggesting the US committee report is likely to be the same as that of the Telegraph independent directors.