By: Mark Fitzgerald
Conrad Black’s former holding company will relinquish control of the parent company of the Chicago Sun-Times under a settlement announced late Tuesday by Sun-Times Media Group (STMG).
STMG said Toronto-based Hollinger Inc. would convert its super-voting shares into shares that have just one vote apiece, and that the six directors installed in a virtual coup by Hollinger last spring would resign from STMG’s board of directors.
Earlier in the day, the Toronto-based holding company, Hollinger Inc., settled a lawsuit by the U.S. Securities and Exchange Commission (SEC) without admitting or denying allegations its former Chairman Black and his right-hand man-turned star witness F. David Radler improperly pocketed some $85 million that rightfully belonged to STMG.
Under the agreement with STMG settling the many legal disputes between the entities, Hollinger Inc. will convert its Class B common shares, which have 10 votes per share, to Class A common shares, which have one vote, on a one-to-one basis. Hollinger owns all the Class B shares, giving it a 70% voting interest in STMG on a 19.7% equity stake.
In addition, STMG will deliver 1.499 million new shares of Class A stock if, and after, the settlement agreement is approved by a committee of Hollinger’s Canadian creditors.
STMG said the settlement was approved Monday by the Special Committee of its board of directors, which conducted the internal investigation into the fraud by Black and Radler. Tuesday, the full board approved the settlement, STMG said. It added that the agreement had also been approved by Hollinger’s board.
Last summer, Hollinger sought protection from creditors on Canada under the Canadian Company Creditors Arrangement Act (CCAA). The settlement is subject to an Ontario court’s approval. STMG said it would ask for approval of the plan at a hearing scheduled for next April 22 and 23.
STMG and Hollinger last year settled U.S. and Canadian class actions lawsuits in an agreement in which its insurers would pay STMG and/or Hollinger as much as $24.5 million. The two sides have agreed to split the insurance proceeds 80% for STMG and 20% for Hollinger. They also agreed that if they can recover any money from another holding company once owned by Black, Ravelston Corp. Ltd., they will divide it evenly. Ravelston is in insolvency proceedings in an Ontario court.
Hollinger is also reimbursing STMG’s legal fees, subject to a cap of $1 million.
Black was convicted of three counts of fraud and one count of obstruction of justice in federal court in Chicago last summer. Last month he began serving a 6 1/2-year sentence in a Florida prison. Radler, who testified against Black, is also serving a 39-month sentence in a plea bargain with federal prosecutors.
STMG (NYSE: SVN) announced the settlement after the close of trading. Tuesday STMG stock closed unchanged at 80 cents a share.