Hollinger International agreed on Tuesday to sell its most valuable asset, the Telegraph Group, to the Barclay brothers of Britain for ?65 million (US$1.2 billion) in cash.
David and Frederick Barclay, who own The Scotsman newspaper, a British retail chain and London's Ritz hotel, beat out dozens of interested buyers for the Telegraph Group, which includes The Daily Telegraph, Britain's largest broadsheet, The Sunday Telegraph and The Spectator magazine.
The winning bid is about ?100 million higher than some initial bids for the Telegraph assets. Several serious bidders, including Richard Desmond, owner of The Express newspaper in London, as well as The Daily Mail and General Trust, dropped out in recent weeks as the price rose. By Tuesday, only two bidders were left in the running, the Barclay brothers and a partnership of the venture capital firm 3i and David Montgomery, a British newspaper executive with a reputation for cost-cutting.
For the Barclay brothers, taking control of the assets is the culmination of negotiations that began in January. Then, they signed a deal with Conrad Black, the ousted chief executive of Hollinger International, for his share of the company, which includes control of more than 70 percent of the voting rights. That deal was contested by Hollinger International's board and rejected by a US judge in Delaware, where Hollinger is incorporated. The Barclay brothers also made an offer for the entire company in late January that valued it at US$1.4 billion, or about US$18 a share.
Hollinger's board retained the investment bank Lazard to arrange an auction for all of its assets, but only the Telegraph Group and The Jerusalem Post have attracted much attention from suitors. The company also owns The Chicago Sun-Times and more than 100 smaller publications.
The Barclay brothers have a reputation for investing in assets rather than trimming costs, which may have won them the deal. The publications "will be in good hands, with people who understand the business and will further enhance these great properties," Gordon Paris, Hollinger International's interim chairman and chief executive, said in a statement on Tuesday night.
The 151-year-old Daily Telegraph began life as a vanity press but grew to become the voice of Britain's Conservative Party. In recent years the its circulation has dwindled in the face of competition from tabloids including The Daily Mail and The Sun. The Tory party associations do not help, media analysts say, as long as Prime Minister Tony Blair remains in power.
The Daily Telegraph's circulation slipped below 1 million last year. An audit that ended in April showed the paper's circulation was 916,205. In 2001, the most recent figures available, The Telegraph had sales of ?337.5 million.
Hollinger International plans to use a portion of the proceeds of the deal to pay down debt, and said it planned to buy back US$300 million in bonds. It also has a US$200 million bank loan. Hollinger has been in a state of flux since Black was asked to step down in November after an internal investigation found he had received US$35 million in unapproved payments from the company.
Black did not welcome Tues-day's deal. Hollinger Inc, the company that holds his voting and equity stake in Hollinger Internation-al, praised the brothers in a statement Tuesday evening but questioned the price. When Hollinger International rejected the Barclays' initial bid for the whole company in January, the company and its advisers "assumed an obligation to deliver greater value to shareholders," the statement said.
"Their faltering strategic process has failed to do so," it added.
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