Hollinger International adopts 'poison pill', sues Conrad Black
Last Updated: Tuesday, January 27, 2004 | 9:58 AM ET
CBC News
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Source: System for Electronic Document Analysis and Retrieval
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A corporate review committee, comprised of the independent directors at Hollinger International, said they were taking the steps so the board is "able to effectively represent all of the company's shareholders – not just one with a minority stake that has controlling votes."
Black's lawyer John Warden denounced the moves, calling them "a descent into the lawless conduct of corporate affairs" in a statement.
On Jan. 23, Hollinger Inc. announced it will use its controlling stake in its U.S. subsidiary to change the bylaws of Hollinger International so that any sale of its newspaper assets would have to be approved by all of Hollinger International's board members, including Conrad Black.
The bylaw changes effectively gives Black a veto over Hollinger International's attempts to sell off some of its newspapers.
The move came on the heels of reports that Hollinger International is speeding up efforts to solicit bids for the papers - including the Daily Telegraph, which is widely viewed as the most sought-after of the Hollinger media interests.
Hollinger International's attempt to step up its search for bidders is widely seen as an attempt to scuttle Black's attempt to sell Hollinger Inc. to Britain's Barclay brothers, a $605-million deal that was announced on Jan. 18.
In a lawsuit filed in Delaware, Hollinger International seeks to block Black's attempt to disband the company's corporate review committee.
Hollinger International said it wants an injunction "preventing Lord Black from continuing his breaches of fiduciary duties as director of Hollinger International, and restraining him and companies controlled by him from attempting to consummate the transaction he negotiated with the Barclays."
Hollinger International also wants a court to order that if the Black's deal with the Barclays proceeds, then all of Hollinger Inc.'s multiple voting shares in Hollinger International will automatically be converted to common shares. Such a move would cut Barclays' voting power to 30 per cent, not the 73 per cent voting control Black possesses through Hollinger Inc.
Under the poison pill, if any new shareholder acquires 20 per cent or more of Hollinger International's voting power without board approval, existing shareholders could buy cheap shares in the company.
That could effectively flood the market with new shares diluting the holdings of existing shareholders.
Warden said the poison pill was "invalid" because it wasn't approved by all the directors, including Black.
Hollinger Inc. shares slipped 20 cents to $7.20 on the TSX. Hollinger International shares rose five US cents to $15.05 US in New York.
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