Enlarge imageBy Adam Pasick
LONDON (Reuters) - Tycoons David and Frederick Barclay have pulled their offer to buy press baron Conrad Black’s Hollinger Inc, exacerbating a cash crunch at the firm.
Toronto-based Hollinger Inc’s main asset is a controlling voting stake in Chicago-based Hollinger International, owner of newspapers including Britain’s biggest-selling broadsheet, the Daily Telegraph, and the Chicago Sun-Times.
A U.S. court last week halted Black from selling his majority stake in Hollinger Inc to the publicity-shy twins, who own the Scotsman newspaper and London’s Ritz Hotel and live in a castle on an island off northern France.
The ruling made the withdrawal of their offer for the rest of Hollinger Inc a formality, though the pair could still take another shot at taking control of Black’s newspaper stable by making a bid directly to the Hollinger International board.
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In withdrawing their bid for Black’s holding company, the Barclays also ended their agreement to fund a buy-back of Hollinger Inc debt.
The company missed a $7.4 million (4 million pounds) debt payment on Monday and said it was trying to find a way to make the payment within 30 days, after which it would be in default.
The funding crisis stems from a bitter feud between Hollinger International and Black, who was forced out as chairman and chief executive after the company accused him of receiving millions of dollars in unauthorised payments.
Hollinger International also cut off management fees to Black and other executives, which they had used to service Hollinger Inc’s debt.
When the judge blocked the sale to the Barclays, he included a clause saying Hollinger International must offer short-term financing to Hollinger Inc to help make the interest payment.
The judge, Leo Strine, also said Black, former Hollinger International officer David Radler, and a private company controlled by Black must "live up to their substantial obligations" to Hollinger Inc.
Hollinger Inc’s funding crisis takes place as investment bank Lazard is seeking buyers for Hollinger International or its newspapers, which is expected to attract a host of potential bidders including private equity groups and publishers in the United States and Britain.
The Barclays have not publicly ruled out placing a bid through Lazard, but a source familiar with the matter said the twins were likely to prefer a bid for all of Hollinger International rather than bid for individual assets.
"They’re much more likely to make a full scale bid for Hollinger International.... They’ll just make an offer to the board," the source said.
Spokesmen for Lazard and the Barclays declined to comment.
Daily Express publisher Richard Desmond, who is seeking to buy the Telegraph newspapers, this week sold off pornography magazines including "Asian Babes" and "Readers’ Wives" in an attempt to pre-empt potential concerns of UK media regulators.
If Desmond were to buy the Telegraph, UK media regulator Ofcom would subject the deal to a public-interest test to determine if the paper’s editorial standards would be upheld.
Desmond still owns the profitable adult-themed Fantasy Channel TV business.
