Sun-Times Media Group's Key Shareholder Wants Sale Of Chain

By: Mark Fitzgerald On the eve of the Sun-Times Media Group (STMG) annual meeting last Tuesday, controlling stakeholder Hollinger Inc. demanded an immediate sale or other "strategic alternative" for the Chicago newspaper publisher, a U.S. Securities and Exchange Commission filing disclosed late Wednesday.

"We believe that the board of directors of Sun-Times Media Group should immediately commence a formal process to consider all the strategic alternatives to maximize value for the benefit of all the stockholders of Sun-Times Media Group," Hollinger Inc. CEO G. Wesley Voorheis wrote in a June 11 letter to STMG President and CEO Cyrus F. Freidheim Jr.

"In light of the foregoing, as well as the significant stake in the company that we currently hold, we have decided that we would like two of our nominees to become directors of Sun-Times Media Group. We will furnish the names of our nominees shortly," Voorheis added.

Toronto-based Hollinger Inc., which deposed newspaper baron Conrad Black once used to control his business empire, holds an approximately 66.8% voting stake and 17.4% equity interest in STMG, which was formerly called Hollinger International.

At its annual meeting, STMG Chairman Raymond revealed that Inc. had asked for two board representatives, to join the eight directors who now comprise the board -- but he did not disclose that it was pushing for strategic alternatives.

Voorheis letter has a cordial tone, saying Inc. recognized the "extensive efforts" Freidheim and his mostly new top management teams had made to turn around a company bleeding from alleged looting by Black and other executives, a circulation fraud scandal at the flagship Chicago Sun-Times, and sizable potential tax problems in Canada and the U.S. Last year, STMG lost $40 million.

"And there has never been an issue about you and your fellow directors' good faith desire to do the right thing for the Sun-Times Media Group stockholders," Voorheis wrote.

Nevertheless, he said, Inc. had "a number of concerns" about the business strategy STMG laid out to analysts and investors last month.

Among them: "the state of the media industry generally in the United States; the execution risk involved with the successful implementation of the plan; the postponement of the consideration of strategic alternatives for Sun Times Media Group until 2009; and the lack of transparency, and the uncertainty relating to, the unresolved tax issues faced by Sun-Times Media Group."

A spokesperson for STMG could not be reached late Wednesday.

In the past, STMG has resisted giving Inc. board representation, especially since the two companies are suing each other transactions each believes improperly benefited the other.

"As we have said before, we do not intend to interfere in any way with the mandate" of the STMG special committee" still investigating the alleged improper dealings, Voorheis wrote. "It is important to point out that, as the company's largest shareholder, our interests are aligned with those of all of the stockholders of Sun-Times Media Group," he added.


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