Conrad Black to buy back his Telegraph shares

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The Independent Online
CONRAD BLACK is set to buy shares in the Telegraph for about 330p only months after selling part of his stake in the company at 587p. The sale provoked outrage when shortly afterwards the shares collapsed after the cover price of the Telegraph was slashed from 48p to 30p.

Hollinger, the media tycoon's quoted Canadian holding company, said yesterday it planned to start buying about 6.8 million shares on Monday at around the current share price. It wants to take its stake in the Telegraph - which is by far its most important investment - back up to 62 per cent. The news helped the shares rise 20p to 330p.

The move is bound to reopen investors' wounds. In May Hollinger sold 12.5 million shares in the Telegraph, reducing its 66 per cent holding to just under 57 per cent. The shares were then changing hands at 587p. Hollinger, which bought most of its stake in 1985 at 50p a share, made a large profit.

The sale caused an outcry when four weeks later, on 22 June, the group said it was slashing the cover price of the Telegraph from 48p to 30p. The prospect of an all- out price war in the newspaper industry terrified the City and the shares plunged by 191p to 349p. Investors who had bought Mr Black's shares at 587p a month before were left with huge losses.

A Stock Exchange investigation exonerated Mr Black, saying there was no evidence he had sold knowing that the price cut and a share price fall would follow. However, his reputation was damaged, especially when Cazenove, the City's most prestigious stockbroking firm, administered an unprecedented rebuke by resigning.

Jack Boultbee, Hollinger's vice- president, said the company had decided to start buying shares in the Telegraph once again because the present price grossly undervalued the company.

Its minority stakes in John Fairfax, the Australian newspaper group, and Southam, a Canadian company, were worth about pounds 2.10 a share, so the current share price valued the Telegraph and Sunday Telegraph at only pounds 150m. 'That's absurdly low,' he said.

The purchase was not being made because Hollinger knew of any plans to raise the Telegraph's cover price, he insisted. 'Boy, do I wish we could see an end (to the price war), but we can't,' he said. It was a mark of Hollinger's confidence in the paper's prospects.

Circulation at the Telegraph has risen by about 100,000 to around 1,090,000 a day since the price cut. But the cut is estimated to be costing about pounds 1m a week. Hollinger says third quarter operating profits, due to be released next month, will be lower than last year, despite an extensive cost-cutting exercise.

Shortly after the collapse of the Telegraph's share price, Mr Black said he would be willing to buy back some or all of the shares he did not own if the share price stayed so low. But few in the City expected him to act so soon.