Hollinger Shareholders Angry at Meeting

By: Meg Richards, AP Business Writer (AP) Media baron Conrad Black tried to placate angry shareholders at Hollinger International's annual meeting Thursday by agreeing to surrender much of his control over the company.

Black was by turns cutting, droll, and fiercely defensive about shareholder charges that he and other executives should not have collected $73.7 million from noncompete agreements while selling off several newspapers in Canada and the United States.

Vehemently denying that he had been overpaid or that any wrongdoing had taken place, the newspaper tycoon said an independent committee of board members would examine the fees, questioned by minority shareholder Tweedy, Browne Co.

He announced an agreement with Southeastern Asset Management, the company's largest institutional shareholder, that will significantly reduce his control in the company by ending a two-tiered class structure of shares.

Black's voting control within Hollinger International, currently at 73%, will be reduced over a period of five years to about 42%. Despite the chief executive's loss in voting power, it was clear the deal, which Black called a "support agreement," would leave him firmly in charge.

The news pushed Hollinger International's share price up 7% to close at $11 on the New York Stock Exchange. But the changes fell short of demands from shareholders such as Tweedy, Browne, who had sought full recovery of the payments in question. The resulting gloves-off war of words contrasted sharply with the rarified atmosphere of the Fifth Avenue Metropolitan Club, where the meeting was held, and the usually dry and scripted nature of such functions.

The newspaper company has long been majority-owned by Hollinger Inc., a publicly traded Canadian holding company that Black controls through the privately held Ravelston Corp., which provides management advice and financial services to the media group.

Hollinger International, which publishes the Chicago Sun-Times, leading British broadsheet The Daily Telegraph, and the English-language Jerusalem Post, sold several newspapers in a series of deals totaling more than $2 billion. As part of the sales agreements, nearly $74 million was paid in noncompete fees to Black, other Hollinger executives, and Ravelston. Tweedy, Browne and other shareholders argue the money should have gone directly to the newspaper company.

Black dismissed the allegations of abuse and concerns about questionable practices.

"Like all fads, corporate governance has its zealots, and its tendency to excess," Black said. "Governance questions will not be difficult to resolve with reasonable shareholders, as our agreement with Southeastern shows."

Black insisted Hollinger's leadership had performed well, turning a profit on newspapers that had been "sluggish financial basketcases" when they were acquired. He said the noncompete fees collected when they were sold were "standard industry practice." When Christopher Browne, whose firm is Hollinger's third-largest shareholder, pressed him to name other cases where such fees were paid to management, he could not.

"I admit there's an element of ambiguity," Black said, urging that investors "not rush to the judgment that we were helping ourselves to what rightfully belonged to shareholders."

In several acidic exchanges, Black and major shareholders dryly lambasted one another in remarks that strayed well beyond the meeting's focus on business acumen and judgment.

Hedge fund manager Leon Cooperman, noting he'd picked up the bill when he and Black last lunched in Palm Beach, chided board members and management over executive pay.

"The only thing unfair is that the board allowed this to go on for so long," said Cooperman, of Omega Advisors. He said Hollinger lately has been outperformed by other newspaper companies. "You don't pay a premium for discount performance."

Black parried by noting he'd had Cooperman to his home for wine, then chalked his criticism up to a lack of knowledge, saying the comparison was inappropriate because Hollinger's largest newspapers operated in extremely competitive markets. "You don't know what you're talking about," he concluded.

Some shareholders questioned Hollinger's relationship with Ravelston. Black acknowledged the situation is "not optimal" and pledged it would be changed. For now, the agreement with Southeastern caps annual payments to Ravelston at $20 million, with Black's share set at $6 million. The Memphis, Tenn.-based investment firm will also nominate three new independent directors, he said.

No stranger to exclusive clubs, the quixotic CEO became Lord Black of Crossharbour in 2001 after abandoning his Canadian citizenship.

Several members of Hollinger International's corporate board are also well-connected: Former Secretary of State Henry Kissinger and Richard Perle, former assistant secretary for the U.S. Department of Defense, are among the directors. Former Sotheby's Chairman A. Alfred Taubman, released from federal prison last week after serving time for fixing art prices, was not nominated for a new term.