Daily Mail switches private equity partners for Telegraph bid
Monday 10 May 2004
The Daily Mail & General Trust's bid for the Telegraph was thrown into confusion at the weekend after it emerged that the publisher has split from its bidding partner.
DMGT now has only 10 days to find a new partner for its bid or decide whether to carry on in the bid battle alone and take on the full risk of the acquisition being blocked by competition regulators.
The final stages of the auction of Hollinger International, the Telegraph Group's owner, comes amid swelling legal action against Conrad Black, its former chairman. Full details are expected today of a $1.25bn lawsuit from the current board of Hollinger International against Lord Black on allegations of racketeering.
Until this weekend, DMGT had been working on its bid for the Telegraph titles with Cinven, the private equity house, but it is now understood the publishing group is looking for another partner. The deadline for all "full and final" bids is 20 May.
Cinven and DMGT have parted company over the terms insisted on by Cinven. It was operating, in effect, as an insurance partner for DMGT's bid, automatically acquiring The Telegraph in the event that the Government objected to the deal and forced DMGT to sell it. Cinven was demanding a multimillion-pound fee to provide this service.
Lawyers for DMGT, however, believe it is likely to be an unnecessary expense, as the group has a strong case to put before competition regulators. DMGT insists it has the finances to bid for the papers outright, but it is thought to prefer another partnership with private equity, although this will be structured along different lines to the Cinven deal. DMGT has so far only shown interest in the Telegraph titles, but if its new partner was interested in all its assets, DMGT could be willing to take them on.
There are thought to be six other bidders for the Telegraph, including the billionaire Barclay brothers. All are expected to make a bid in this next round of the auction process. A price tag of £600m is thought to accompany the British newspapers, but some bidders are keen to acquire the whole group, which includes the Chicago Sun-Times and the Jerusalem Post.
The escalating legal battle between Lord Black and Hollinger, however, may make the auction of the Telegraph titles more complicated. Lord Black strongly denies any alleged wrongdoing and called the lawsuit by Hollinger an act of "tabloid journalism masquerading as law".
The lawsuit amends a more modest initial complaint seeking $200m in damages from Lord Black and is based on discoveries made by Richard Breeden, a former chairman of the SEC who is conducting an internal inquiry in to the company.
Barbara Amiel, Lord Black's wife, and Dan Colson, the former head of the Telegraph Group, have also been listed as defendants in the lawsuit. Neither has been accused of racketeering.
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