Black mischief

23 May 2003

Hollinger’s chairman has made minimal concessions to shareholders, trading his baronial control for a pact with a single other investor. He will come under pressure to do more. But does the structure of the rest of his empire allow him to?

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Hollinger International's chairman, Lord Black, will relinquish control of the company. At the annual shareholders' meeting on 22 May, he undertook to progressively reduce the voting weight of New Yorklisted Hollinger International's B class shares, which carry ten times as many votes as other shares. He had also agreed to sell between 5% and 10% of the ordinary shares to Southeastern Asset Management. By 2006, that would have reduced the interest in the company held by Black's Canadian company, Hollinger Inc to a minority, but Black has agreed with Southeastern that will allow the two together to maintain effective control over Hollinger International.

Black will also cap the annual payments Hollinger International makes to a private company he controls instead of paying him and several other directors a salary. The management payments will henceforth be limited to $20m, compared to $24m in 2002.

The Hollinger board has also set up a committee to look into $73m paid by the buyers of some of Hollinger's newspapers to Black and three other Hollinger directors in 2000 and 2001 in return for noncompetition undertakings. Shareholder Tweedy, Browne has demanded via its lawyers that Black and the others "disgorge" those payments.

In an article of 22 May we said Tweedy, Browne had built their stake in Hollinger by 11% between March and May 2003. Actually, the addition to their stake during this time was not material. Tweedy, Browne's total stake in Hollinger is 18%.

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