Black Ups Hollinger Privatization Bid

By: Mark Fitzgerald Conrad Black's newly sweetened bid to take Hollinger Inc. private could get the go-ahead for a March 31 shareholders vote as early as today.

In a statement Monday morning, Hollinger Inc. said the independent directors considering the so-called "going private transaction" had recommended the full board clear the way for a March 31 vote. Hollinger Inc. said its board of directors will meet after a hearing scheduled for Monday before an Ontario judge.

Hollinger said its directors would consider the key issue of whether to allow the privatization vote to go forward before the court-appointed inspector has made his report on self-dealing and other allegations made against Black and other key executives.

Days after Hollinger Inc. released an unaudited balance sheet claiming that companies controlled by Black owed it U.S. $57 million, Black increased his bid for all the Hollinger shares he does not control by 4.8%.

The new offer, for C$7.60 per share, has a value of about U.S. $47.4 million.

Through his Ravelston Corp. holding company, Black already owns 78% of Hollinger Inc., which in turn controls Hollinger International Inc. -- publisher of the Chicago Sun-Times and many nearby dailies and community papers -- through a 68% voting and 18.2% equity interest.

Hollinger International in January released its long-overdue financial statements for the year ended Dec. 31, 2003 and said it would be releasing quarterly statements for 2004 soon. Hollinger Inc., however, maintains that it is unable to file its own statements for that period because of it "loss of control of Hollinger International in ... November, 2003 and the continued insufficient co-operation by Hollinger International and Hollinger International's auditors."

Instead, late last week Hollinger Inc. released an unaudited balance sheet that said it was owed C$14.4 million by Black's Ravelston Corp. and C$57.4 million by Ravelston Management Inc. (RMI) -- and it added that RMI "may dispute all but approximately $4.1-million of this receivable." All told, the Black company debts claimed by Hollinger total approximately U.S. $57 million.

Hollinger Inc. said it owes black about U.S.$16.5 million in non-compete fees. Hollinger Inc. also said it owes C$30 million (approximately U.S. $24.4 million) to Hollinger International, mostly in promissory notes carrying a hefty 14.25% interest rate.

Legal expenses have been heavy, the Hollinger Inc. balance sheet discloses. The company is being sued on a number of fronts and must pay for the court-ordered inspection of all non-arms-lengths transactions. "It is unclear as to whether ultimately the costs of the Inspection may be shared more broadly," Hollinger states in discussion of the balance sheet, "but initial costs of the inspection are being borne by the company at a rate approaching [C]$1 million per month [about U.S. $814,300[. The cost of the inspection is anticipated to total approximately [C]$8 million." That's on top of about $9.36 million in other legal fees, Hollinger said.


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