Black Ally Rips Hollinger Performance Ahead of Annual Meeting

By: Mark Fitzgerald In a blistering open letter released two weeks before Hollinger Inc. holds its first shareholders' meeting since 2003, a former board member and long-time business partner of Conrad Black says management of the Toronto-based holding company has squandered its cash -- and sat idly while its only asset, Chicago-based Sun-Times Media Group (STMG) has declined precipitously.

"The board has permitted Hollinger to spend $70 million of its dwindling cash, and has failed to exercise any influence on Sun-Times Media Group (formerly Hollinger International), Hollinger Inc.'s subsidiary and only significant asset, while presiding over the destruction of 95% of Hollinger's shareholder value," Peter G. White said in the letter.

"Meanwhile, the formerly profitable Chicago Sun-Times has become chronically unprofitable," White added. "Eleven of the past 14 quarters have been unprofitable, although the company has no debt and substantial cash. More than 20% of the paid circulation of the Sun-Times has been lost. Shareholders' equity has declined by over $500 million, and about one billion dollars of market value has disappeared (60% of the historic maximum), while CEO Gordon Paris received $17,000 a day, or $13 million over three years."

Hollinger Inc. CFO Bill Aziz said the company had no comment on White's statements at this time.

Tammy Chase, director of investor relations for STMG, said, "Given that this is a Hollinger Inc. matter, it's not appropriate for us to comment on this statement."

Hollinger Inc. was one of the company's Black used to control his now-lost global newspaper empire. The company owns a 19% equity share, and 70.1% voting share in STMG.

Black is on trial with three other former Hollinger International executives in Chicago on federal criminal fraud charges, accused of using Hollinger Inc. and other entities in a scheme to pocket improper non-compete fees related to the sale of dozens of papers in North America.

White's attack comes as Hollinger prepares for its May 7 annual meeting, in which it is asking shareholders to reelect the board of directors, including recently named CEO Wesley Voorheis.

White's letter notes that Voorheis strongly opposed a bid by Black to take Hollinger Inc. private at a price of C$7.60 a share in 2005. The privatization bid was rejected by the Ontario Securities Commission (OSC).

"In the two years since the OSC rejected the privatization proposal, and under the management of the current board of directors, Hollinger's share price has declined to some 38 cents," White said.

White also blasted the board for its attempts to settle its litigation with STMG. He said that on March 8, Voorheis "apparently sent a letter and settlement proposal" to STMG CEO Cyrus Freidheim, proposing to swap Hollinger's controlling voting stake in exchange for the forgiveness of a loan. White's statement does not mention the size of the loan, and STMG, while confirming a proposal was made, has not disclosed its terms.

"Hollinger Inc. also proposed to co-operate with STMG to wind up and to distribute the estates of Ravelston and its subsidiaries," he added. Ravelston owns a controlling interest in Inc., and was another entity controlled by Black. It is in receivership in a Canadian court.
"The current management of Hollinger has not exercised or attempted to exercise any real control over its subsidiary, STMG as the assets of that company have dissipated," White said. "Rather, Hollinger is apparently engaged in an exercise to liquidate its corporate parent, Ravelston.


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