Hollinger ruling a blow to Black
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Black was ousted as Hollinger International CEO in November.
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NEW YORK (Reuters) -- Media tycoon Conrad Black has suffered a stinging legal defeat, with a judge blocking his bid to sell control of newspaper publisher Hollinger International Inc. and rebuking him for "cunning" behavior.
The ruling Thursday by Vice Chancellor Leo Strine follows a three-day trial last week in Chancery Court in Delaware, where the company is incorporated.
It is the latest development in the bitter feud between Black and Hollinger International, which ousted Black as chief executive in November amid a probe into disputed payments he collected.
Strine, ruling that Black "breached his fiduciary and contractual duties," issued an injunction preventing the mogul's sale of a majority stake in Hollinger Inc., the holding company he uses to control Chicago-based Hollinger International, to British tycoons David and Frederick Barclay.
The ruling could allow Hollinger International to move forward with an auction of its newspapers, such as Britain's Daily Telegraph, the Chicago Sun-Times and the Jerusalem Post.
Hollinger Inc. issued a conciliatory statement following the ruling, suggesting Black does not immediately plan to appeal.
Black said he and Hollinger Inc. "respectfully disagree" with Strine.
But he said they "look forward to the prompt and effective pursuit of (investment bank) Lazard's work and to the presentation to International and Hollinger of a course producing value superior to that presented by the Barclays' tender offer for Hollinger (Inc) and proposed bid for International."
The Barclays made a tentative $18 per share buyout offer to the Hollinger International board in January, which was rejected.
Hollinger International has accused Black of lining his pockets with millions of dollars in unauthorized compensation. Black denies all wrongdoing.
Strine, in a colorful 130-page ruling, upheld a shareholder rights plan, or "poison pill" takeover defense, that Hollinger International enacted to thwart the sale of the parent company. He also blocked Black's attempted change in the subsidiary's bylaws to give him veto power over any board decision.
A spokesman for the Barclays had no immediate comment.
Strine wrote that Black "repeatedly behaved in a manner inconsistent with the duty of loyalty he owed the company," and misled the board about his dealings with the Barclays twins, who own the Scotsman newspaper and the Ritz Hotel in London.
Black acted "in a cunning and calculated way," Strine wrote, and "misrepresented facts to the (Hollinger) International board, used confidential company information for his own purposes without permission, and made threats...towards International's independent directors."
Black testified he was pressured by board members to step down as CEO. But Strine noted that Black, a member of the UK's House of Lords famous for his conservative political beliefs and florid style, is "(not) a meek man, easily intimidated by others. The contrary is true."
The case has been closely followed by corporate governance experts who have criticized what they called Black's imperious management style and apparent disdain for minority investors. Black and the company face shareholder lawsuits, and there are multiple lawsuits pending between the press tycoon and the new management of Hollinger International.
"This is a vindication of the shareholders' rights to get maximum value for their assets," said Robert Curry Jr., a lawyer for investment firm Tweedy Browne Co., a shareholder that spurred the creation of a special panel to probe the company's finances. Black stepped down as CEO after the committee uncovered $32 million in disputed payments to him and several other top executives.
Law professor Lawrence Hamermesh, of the Widener University School of Law in Delaware, said the ruling seemed to hinge on basic issues of Black's conduct.
"This judge was persuaded that the law and equities were very strongly aligned on one side," he said. "He found that Black was not living up to promises."
Black's lawyers argued that Black needed to consummate a deal with the Barclays to alleviate a potential funding shortfall at the parent company. Hollinger Inc. faces a $7.4 million interest payment due March 1 on its debt.
As part of the ruling, Strine said Hollinger International must offer short-term financing to the parent company to help make the interest payment. But Strine also said Black, former Hollinger International chief operating officer David Radler and a private company controlled by Black must "live up to their substantial obligations" to Hollinger Inc.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
