Judge Rejects Conrad Black Lawsuit, Clears Telegraph Sale

WILMINGTON, Delaware, July 29 (AFP) - A US judge Thursday cleared the way for the sale of Britain's Telegraph Group, rejecting a lawsuit by tycoon Conrad Black seeking a shareholder vote that would have delayed the deal.
Vice Chancellor Leo Strine of the Delaware Chancery Court rejected the petition from Black to force a vote by shareholders of the holding company -- which he controls -- before the 1.23 billion dollar sale set to be finalized Friday, can take place.
The lawsuit was the latest round in a war between Black and his Canadian holding company and US-based Hollinger International over the future of media empire Black built.
The ruling clears the way for signing of the deal to sell the Telegraph Group, which includes London's Daily and Sunday Telegraph, to Frederick and David Barclay, billionaire investors from Britain.
Chicago-based Hollinger International said in a statement it expects to close the deal Friday as planned.
"We are extremely pleased with Vice Chancellor Strine's ruling today," said interim chief executive Gordon Paris.
"The agreement to sell the Telegraph Group was the outcome of a thorough and exhaustive evaluation of strategic alternatives available to the company and its shareholders. We are now in a position to complete this transaction and deliver on our promise to create value for all of our shareholders."
But Black's holding company in Toronto, Hollinger Inc., appealed the ruling to the Delaware Supreme Court, seeking to block it from taking effect.
"We regret Vice Chancellor Strine's decision," the statement said, adding that the holding company's directors "have decided to pursue an appeal of the ruling, and Hollinger Inc.'s legal counsel filed such an appeal this evening."
The same judge in February blocked an effort by the Canadian-born media baron and member of Britain's House of Lords to sell his controlling stake in the company to the same Barclay brothers for an estimated 466 million US dollars, ruling that Black had "breached his fiduciary duty" to the news empire.
In Thursday's 93-page decision, Strine wrote that even as a controlling shareholder, Black had "no inalienable right to usurp the authority of boards of directors" put in place at the company.
The judge also rejected Black's argument that under Delaware law, shareholders must be consulted if "substantially all" of the assets of a company are sold.
"When considered quantitatively and qualitatively, the Telegraph sale does not amount to a sale of substantially all of (Hollinger) International's assets," he said.
The sale of the Telegraph Group, which includes The Weekly Telegraph and The Spectator, a weekly political magazine, leaves Hollinger International with a number of other assets including the Chicago Sun-Times and Jerusalem Post.
Even after the sale, Strine wrote that Hollinger International "will remain a profitable publishing concern."
Strine sidestepped the issue of whether a parent company -- in this case, Canadian holding company Hollinger Inc. -- could block the actions of a subsidiary such as the US-based operating company because the sale did not represent "all" or "substantially all" of the company's assets.
But he did say that because of his questionable conduct, Black and his holding company "posed a legally cognizable threat to the rights and best interests of (Hollinger) International and its public stockholders."
Relations between headquarters and its affiliate deteriorated months ago, when Hollinger International ousted Black, accusing him of having misappropriated company funds. The company demanded 1.25 billion dollars in damages and interest, and several lawsuits and investigations are pending.
Hollinger shareholders meanwhile are seeking 200 million dollars in damages and interest from him on grounds that he helped himself to unwarranted indemnities.
Black, through his private holding company Ravelston, owns 78 percent of Hollinger Inc. which in turn has a 73 percent voting and 30 percent equity interest in Hollinger International.
The planned sale gives the Barclays the best-selling British broadsheet to add to their collection of newspapers, which already includes The Scotsman and The Business weekly.
The Barclay brothers, in their late 60s, are notoriously secretive. Even their exact date of birth is unknown.
But while Canadian-born Black's forceful personality has dominated his newspapers, the Barclays have pledged not to interfere in editorial matters.