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Hollinger head Conrad Black is stepping aside

By The Associated Press and Bloomberg News

Conrad Black of Canada is also a British lord.

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TORONTO — Conrad Black stepped aside yesterday as chairman and chief executive of Hollinger, the Toronto-based holding company that has voting control over newspaper publisher Hollinger International.

The resignation came just as a Toronto court was scheduled to hear a shareholder demand for Black's resignation. Black has announced his intention to buy out the minority investors and take Hollinger private.

The main asset of the company is its 18 percent equity interest and 68 percent voting control of Chicago-based Hollinger International, which recently sold The Daily Telegraph of London for $1.2 billion. The company's holdings still include the Chicago Sun-Times and The Jerusalem Post.

Black said Friday he would resign to clear the way for the proposed buyout.

Black's decision to leave Hollinger came as Catalyst Fund General Partner I, a recent investor in Hollinger, sought to have him and several others removed by an Ontario judge.

Black has already been ousted as chairman and chief executive at Hollinger International, after an internal investigation found he and others looted the company of hundreds of millions of dollars.

Changes if private

If Black succeeds in taking Hollinger private, it would be subject to fewer regulatory requirements, such as publishing quarterly financial results and keeping independent directors on its board.

Black faces court cases and regulatory investigations in Canada and the United States stemming from the Hollinger accounting controversy. He has denied misappropriating money and has argued that independent directors of Hollinger International approved the disputed transactions.

Hollinger International on Friday refiled the bulk of a previously dismissed case against Black and his associates, intent on winning back more than $500 million in damage it says they inflicted on the company.
 
Black remains controlling shareholder of Hollinger with 78 percent of the common stock of the company, whose main asset is Hollinger International. Black hasn't said how much he'll offer minority investors.

"If he pays the shareholders fair value and they agree to it, this is certainly a legitimate transaction," said Mary Condon, a professor who specializes in Canadian securities regulations at Osgoode Hall Law School at Toronto's York University. "The issue of whether he has motives we don't approve of is a separate issue."

Shareholders who tender their stock may lose the right to pursue claims against the company. Catalyst, which holds 37 percent of the company's Series II preferred shares, told Ontario Superior Court Judge Colin Campbell at a hearing today that Black's departure is a tactical retreat.

"At any point in time, Lord Black can go back to that board," Catalyst lawyer David Moore said. "As has been shown in the past, decisions can be countermanded quite easily."

Hollinger, whose stock has declined by almost half since early 2002, announced Black's resignation in a one-sentence statement.

Several legal fronts

The court battle in Canada is among several legal fronts for Black, 18 months after minority investors accused him of using his network of holdings to enrich himself and his associates.

Hollinger International's board ousted him in January and later sued him in a Chicago court, contending he and top executives looted the company of more than $400 million, siphoning away 95 percent of the company's net income over seven years through sham payments and self-dealing.

A board committee in August said Black and wife Barbara Amiel Black, a former columnist for the Daily Telegraph newspaper in London that Hollinger International owned until July, submitted expenses such as $2,463 for "handbags for Mrs. BB" and $24,950 for a summer drinks party.

At least two shareholders have filed their own suits against Black, and Hollinger has said the U.S. Securities and Exchange Commission may begin civil proceedings against the company for securities violations.

A committee of Hollinger's independent directors will review Black's proposal to take the company private. A majority of the company's minority shareholders must approve the plan, Hollinger said last week.

A native of Canada who later became a British lord, Black inherited a stake in a Canadian conglomerate that was the predecessor of Hollinger from his father. He focused the company on newspapers, acquiring the Telegraph and the Jerusalem Post and ranking at one time as the third-biggest newspaper publisher by circulation.

After Black was ousted, the company sold the Telegraph, which had been its largest-circulation paper.

In a Delaware court last month, Black agreed not to fight the court's ban on his removing the board of Hollinger International or taking other steps to exercise his control in return for a company promise to give him his fair share of the proceeds from the sale.

Hollinger owns 18 percent of Hollinger International and controls 68 percent of the votes.