Black's buyout leaves N America cold

BY MATTHEW HORSMAN

Conrad Black's proposal to consolidate his worldwide media holdings under American Publishing, his main US company, is leaving North American investors and analysts cold.

The plan, announced this week, would give minority shareholders of the Telegraph group the option of selling their shares for cash or exchanging them for voting shares in American publishing, 64 per-cent-owned by Mr Black's Hollinger Inc, based in Canada. For its part, Hollinger, would sell its 58 per cent share of the Telegraph in exchange for class `A' voting shares in the US company.

American Publishing would also get Hollinger's 25 per cent share in Fairfax Group of Australia and its 19 per cent block of Canadian media giant Southam Inc, publishers of daily newspapers in several Canadian cities.

Provided Hollinger pays a reasonable premium, Telegraph's minority shareholders would probably prefer cash to the voting shares.

"British investors haven't been very happy with Mr Black," Benoit Dub, an analyst at Cr ditfinance in Montreal, said yesterday. "They would probably prefer to take cash. It all depends on the premium."

Telegraph shares closed yesterday at 436p, well below the 1994 high of 620p. Analysts believe American Publishing would have to pay 450p-500p for the minority shares for the consolidation to proceed.

Investors in American Publishing and Hollinger appear equally unimpressed by the proposal. They see it as a paper shuffle without clear advantages to shareholders. Shares in Hollinger and American Publishing rose only slightly in trading in New York and Toronto on Thursday, the day after the proposal was outlined. Investors are worried about newsprint price increases and dilution of shares in American Publishing.

The winner from the consolidation would be Mr Black, who would retain control of his empire and leave himself room to raise further capital through issues of non-voting stock.

The plan faces a few obstacles. It must be recommended by independent directors at American Publishing and the Telegraph and approved by 75 per cent of the Telegraph's minority shareholders.