Telegraph shareholders to stage vote protest

A NUMBER of leading institutional investors in the Telegraph newspaper group will 'positively abstain' from the vote to approve a controversial plan by Conrad Black, the Canadian media owner, to sell an 11 per cent stake in loss-making Canadian publisher Southam to the Telegraph.

Their abstentions are intended to show disapproval for the transaction, without giving the impression that they do not have faith in the management of the Telegraph.

However, a number of institutions, which decided not to buy shares in last year's flotation because of concerns about how Mr Black would exercise his stewardship of the newspaper group, said that the Southam transaction confirmed their fears; as a result, they would not be buying shares in the UK group while Mr Black retained majority control.

The effect of the abstentions will mean that the deal, through which Hollinger, Mr Black's Canadian group, will sell a dollars 129m (pounds 70m) stake to the Telegraph at 11 per cent above the current market price, is certain to go through at Tuesday's egm.

Mr Black is prevented from voting his 68 per cent stake in the Telegraph. But for the deal to go through, he only needs a simple majority of the remaining 32 per cent.

He already has votes in favour from the Berry family, which owns 6 per cent of the shares (and has an agreement by which Mr Black can match any price offered to them for the stake), and from the 2.3 per cent owned by the remaining independent directors of the Telegraph and Caledonia Investments. The latter is represented on the Telegraph's board by Peter Buckley.

At institutional presentations hosted by Mr Black and NM Rothschild, the bank that is advising the independent directors, a number of investors voiced concerns about the deal.

Institutions contacted by the Independent on Sunday this week said they objected to the fact that the Telegraph is paying Cdollars 18.10 a share for the stake - the same price paid by Hollinger when it bought the holding from TorStar in January - while Power Corporation of Canada, the group headed by the French-Canadian entrepreneur Paul Desmarais, is paying Cdollars 14 a share for a similar stake. Southam shares currently stand at Cdollars 16.25. The institutions also objected to the apparent reversal of a clause in the Telegraph prospectus, which said the company would refrain from investing in the US or Canada.

One large investment management house said it had decided to abstain on the vote. 'This is not a decision we have taken lightly. By abstaining, we think we are giving a strong message about our concerns over this deal,' a director said.

Another institution that said it would be abstaining commented: 'It is a positive decision not to vote, not a negative one. Don't think we are not participating in this debate.'

Speculation in Canada is that a vote to approve the Southam deal will lead to a round of asset swaps between Southam, Hollinger and Power. Southam owns 17 daily papers, including two loss-making titles in Vancouver, and has recently announced 1,500 job cuts. Power owns a string of weekly French language titles and Le Soleil in Quebec, the largest-selling French-language paper outside France. Hollinger has a chain of weekly titles.