The Tea Party’s Over
It was in Black’s interest to portray the Telegraph as the only Hollinger International property not beneath his dignity. Under the laws of Delaware, which is where Hollinger International is incorporated, a corporation cannot sell off “substantially all” its assets without the approval of shareholders–which in this case would mean the approval of Black. So Black argued that without his crown jewel, Hollinger International would be just a burlap bag’s worth of provincial rags.
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When Black took his newspaper empire public a few years ago, he concocted a pyramid of holding companies that let him go on running it as his fiefdom. As Strine noted, Black controlled Hollinger International even though his “personal economic stake . . . comprised less than 16% of the company’s equity. As a result, Black arguably stood to gain more on a yearly basis from his managerial perquisites at International . . . than he did from increasing the value of International’s profits and share price.”
Today Black still controls the holding company, Hollinger Inc., that controls some 70 percent of the voting shares of Hollinger International. But he and Radler have no say over anything International does, having been stripped of command by its board, the courts, and the Securities and Exchange Commission while the mess they made is sorted out. And when Strine gave the OK last week, the Telegraph, Black’s ticket to Buckingham Palace, was immediately sold out from under him.
Consider Black’s other exhibitions of chutzpah. There’s his insistence that shareholders should weigh in on the Telegraph sale. As Hollinger International noted in its response and Strine in his opinion, when International in 2000 sold off more than half the company–almost all its Canadian papers–for more than $2 billion, there was no shareholder vote. Strine wrote, “And Inc.–then controlled by the same person who controls it now–never demanded one.”
Surely Black was right that the sale of the Telegraph would diminish the company? Maybe not. Hollinger International hinted in its brief that it had taken the Barclays to the cleaners, obtaining “an epic, above market price” for a paper on the brink. “As one of ten daily papers in a nation of 60 million people,” International reasoned, “it competes for a dwindling readership that is becoming increasingly obsessed with celebrity culture.” A journalism professor was found to say that “the long-term trends of the Telegraph are not good.” But Strine didn’t bite. “On balance,” he wrote, “there is no question that the Telegraph Group is a profitable and valuable one.”
But it wasn’t Axel Springer who wound up with the Telegraph. It was the Barclay twins, who were willing to pay whatever it took. Reclusive multimillionaires who operate from a tax haven in the English Channel, they have no minority stockholders to answer to. Presumably they will soon be dining with the Queen.
