View from City Road: Sticking to the rules in all but spirit

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The Independent Online
Time was when a couple of pence off a can of baked beans would be referred to in dramatic terms as a price war. In the maverick world of national newspapers the term obviously means something rather less sedate - a sudden-death playoff that everyone agrees will mean horrific injuries for all concerned, if not outright mortalities. The sea of red that engulfed newspaper shares yesterday in the wake of Conrad Black's daft decision to follow Rupert Murdoch over the cliff is adequate testimony to that.

What is it about newspaper proprietors that they feel able to throw caution and normal business practice to the winds without a thought for the shareholder value that might be lost? For newspaper editors, the yardstick of success is circulation; their managers, however, are meant to put profit first. Price wars hardly ever justify their cost even if they succeed in their purpose of forcing someone out of the market for good. Consumers, too, ultimately gain little: less choice, worse quality and in the end, higher prices as those who survive desperately try to recoup their losses.

At least in Mr Murdoch's case, News Corp has been able to hide the damage of price cuts first at the Sun and then the Times within the profits of a vast, global media business. Annual losses of perhaps as much as pounds 17m at the Times seem tolerable, if anomalous, in an empire making as much profit as Mr Murdoch's. For Mr Black, too, doing something out of the blue which he must have known would wipe nearly pounds 2 off his share price might be acceptable behaviour if he was the Telegraph's sole proprietor. A tycoon without outside shareholders to answer to can play with his business as he likes; if it ends up broken, he has only himself to blame.

But Mr Black is not a sole proprietor. Nearly two years ago he sold a big minority shareholding in the company to City investors. Worse still, barely more than a month ago, right at the top of the market, he offloaded a further pounds 73m worth of shares on to unsuspecting investors. Cazenove had to twist its clients' arms half-way out of their sockets to get the placing away at all. Mr Black, with characteristic aplomb, claims Cazenove handled the whole exercise badly and 'inelegantly'. It really wouldn't concern him, he insists, if Cazenove resigned; but, then, he would have to say that. In the circumstances, Cazenove has little option but to quit, if it has not already done so. Its clients are baying for blood.

Whatever Mr Black does to explain it, there is no disguising that this is as bad a case as they come of investors being sold a pup. Mr Black already has his script well prepared for the Stock Exchange investigators and others who will come sniffing around the transaction; they are unlikely to find any transgression of the letter of the rules and regulations. None the less, investors might justifiably think he has breached their spirit.

Mr Black insists he had no intention of cutting the Telegraph's price at the time he sold his Telegraph shares, and we must believe him. Certainly, investors who bought the shares did. But as close followers of Mr Black's words will know, intentions are intentions and they never seem to last long in the affairs of a newspaper tycoon. On the previous occasion that Mr Black's Hollinger group sold shares in the Telegraph - on 17 December - it stated that there was no intention of any further disposals. Six months later Hollinger was back. The Telegraph prospectus, too, gave the impression that the Telegraph would not invest in Canada (though there was a let-out clause). Not long afterwards, Hollinger offloaded some of its stake in Southam, a loss-making Canadian newspaper group, on to the Telegraph.

Mr Black is in many respects a remarkable man and inspired financier; investors who manage to cling to his coat-tails might end up making a fortune. Never expect him to follow anything but his own perceived interests, however. Never expect to be treated in anything other that a cavalier fashion as a minority shareholder. No one would accuse Mr Black of behaving unethically - 'I'll see you in court if you do', he threatens - but the City won't touch him again with a bargepole after this.