Black, Hollinger and Barclay

Overview

This profile considers the Hollinger group, founder Conrad Black and successors David & Frederick Barclay.

This page covers -

• introduction
• Conrad Black
• early career
• Hollinger's expansion
• CanWest and Osprey
• Black's Waterloo?
• the Barclays
• holdings
• studies

Introduction

Conrad Black, following in the footsteps of fellow-Canadian Max Aitken (Lord Beaverbrook), made a fortune at home before swallowing newspapers in the UK and other countries.

His Hollinger group at one stage owned around 60% of the daily newspapers in Canada (with around 37% of the daily circulation), over 400 in the US and major papers in the UK and Israel.

Although it downsized, as at January 2004 the group still had major US and UK holdings. In the years prior to November 2003 - when founder Conrad Black stood down as chief executive - it was recurrently pictured as on the hunt for plums such as the Washington Post.

Beset by financial woes, disagreements with his board (which announced that it was suing him over US$200 million non-compete fees, management fees, expenses and other monies) and pending legal action by shareholders and corporate regulators, Black attempted to sell his controlling interests in the Hollinger group to David & Frederick Barclay.

From the tax haven of Jersey the Barclay brothers controlled newspapers in Scotland, property interests such as the Ritz hotel and major mail-order operations.

The deal between Black and the Barclays evaporated in early March 2004, with Lazards subsequently entertaining offers from a range of media groups. The Barclays made the winning bid - some £665 million - for Hollinger's UK titles (inc the Daily Telegraph and Spectator) in July 2004. UK satirical magazine Private Eye sniped that

Allowing the Barclay twins to control the Telegraph titles is like hiring a militant temperance campaigner to run an off-licence, since they are fiercely hostile to the main function of journalism - disclosure

Conrad Black

Conrad Black was born into a wealthy Canadian establishment family (unrelated to the family controlling the Black Press group). His father's dying words to his son were supposedly "life is hell, most people are bastards and everything is bullshit".

Black displayed an entrepreneurial bent by selling exam papers at his private school. As a young man he combined academic study (he has Bachelors and Masters degrees in history, along with a law degree), with work as a newspaper proprietor and success as a corporate reengineer - leveraging stakes in some of Canada's largest retailing, manufacturing and resources companies.

He also found time to write a respectable biography of politician Maurice Duplessis - Duplessis (Toronto: McClelland & Stewart 1976) - and play an active part in national politics. Margaret Thatcher subsequently, if somewhat unfairly, quipped that

I like Conrad Black because he is the only person I have ever met who makes me feel positively 'wet'.

Black subsequently authored a well-regarded biography of FD Roosevelt (building a notable collection of FDR archives for £8 million) and gained attention for his interest in Napoleon - critics were quick to notice a similarity with Northcliffe - and collection of nautical models to accompany four portraits by Warhol, the Alfred Munnings of the 1980s. All in all, very much the model of a 1920s media mogul.

The Financial Times commented in 2004 that

Conrad Black's business ambitions probably always ran second to his urge to be an intellectual force of conservatism. He did not want to simply own newspapers. He wanted to use them to help to reshape the political culture of his native Canada, and to influence that of the United States, Britain and Israel. The irony is that he may well end up being far more successful at enhancing the stature of a great liberal figure - Franklin D Roosevelt - than at creating a lasting legacy of conservatism.

Conrad Black is sometimes compared with another right-leaning media mogul, Rupert Murdoch. But the two are very different. Financially, Black was never in Murdoch's league. Temperamentally, Murdoch is a leader of the dis-establishment; scornful of titles and institutions, while Black has been famously pro-establishment. Avid for a peerage, which he finally achieved, he created a company board that included both Henry Kissinger and Richard Perle. More importantly, he was always much more overtly politically motivated than Murdoch, who has supported governments of the centre-left and the centre-right, depending on his prevailing commercial judgments.

Paul Osborne commented that

Black became the kind of newspaper proprietor whom Evelyn Waugh's Lord Copper would have respected as a social and business equal. He had an undeniable physical presence, with hairy knuckles and paddle-like hands which he would use expressively. Conrad Black was always fond of the sound of his own voice, and with good reason: he often had interesting things to say. When he met Tony Blair in Downing Street or elsewhere, he would dominate the conversation, the Prime Minister indicating glassy acquiescence while the tycoon expounded the merits of the transatlantic alliance, the virtues of low taxation, the lessons to be learnt from Napoleon's career as a war leader, and other matters of equal consequence

Business journalist Bryan Burroughs, writing about Black's fall in the New York Times, said that

What distinguishes this scandal is Black's jaw-dropping sense of entitlement. By almost every account, he thought of shareholders as sharecroppers, bugs on his corporate windshield. He ran Hollinger as a personal fief, doling out favors to directors while accumulating the usual clutch of mansions, private jets and billionaire baubles. He intimidated inquiring journalists with lawsuits; when the Canadian Prime Minister Jean Chretien moved to block his entrance into the British House of Lords, the combative Black sued him, too.

Black more succinctly forecast that he would recover, commenting

I have no doubt that mothers in America use my name to frighten children into finishing their vegetables. But this is not a permanent state of affairs.

Early career

Black's early career as a proprietor was marked by strong antipathy to journalists and, like some of his peers south of the border, an aptitude for stripping out costs. Most of the papers were ailing at the time of acquisition but enjoyed monopoly or duopoly status in their local market.

In 1971 he co-founded Sterling Newspapers, coming to national prominence midway through the decade through ingenious takeovers and restructuring of holding companies with stakes in companies such as Dominion Stores and agricultural machinery giant Massey-Ferguson.

His Hollinger group bought and sold Standard Broadcasting while acquiring a large number of papers under the Sterling banner and a controlling stake in Southam, one of the two largest Canadian chains (in competition with that of the Thomson family).

Hollinger expansion

Like many entrepreneurs with global ambitions, Black faced the challenge of expansion through acquisition and investment without loss of control. He responded in three ways: reduction of costs (and strategic disinvestment), debt-funded acquisition and use of a pyramid structure that featured differential voting stock.

Ravelston, holding the personal interests of Black and close associates, held a 78% stake in Hollinger Inc, a publicly-traded Canadian company. That entity had 30% of the equity in Hollinger International, a publicly-traded US company that controlled most of the newspapers. Ravelston held a 73% voting interest in Hollinger International.

By the early 1990s the Hollinger group controlled over four hundred newspapers in the US and Canada (having leapfrogged over 'McPaper' chains such as Ingersoll and Gannett), had acquired the UK Daily Telegraph group after its controlling family fumbled a move to London's Docklands, had taken the Spectator off Warwick Fairfax's hands during the disastrous privatisation of John Fairfax and subsequently scored a 25% stake in that group.

CanWest and Osprey

Although he significantly improved the circulation and profitability of the Daily Telegraph, his North American empire slipped towards the end of the decade. After disposing of some of the US papers - for example to CNHI - he sold the Canadian arm to Izzy Asper's CanWest (the group that has effective control of Australia's TEN television network).

The sale involved 14 major daily and 126 other daily and weekly newspapers in Canada. That brought in US$3.2 billion and 15% of CanWest's equity (later sold for C$271m). Hollinger subsequently sold Asper its remaining 50% in loss-making Canadian broadsheet the National Post, Black's version of Murdoch's The Australian. Competition from the Post had woken Thomson's somewhat sleepy Globe & Mail but consumed several hundred million dollars.

In 2001, after unsuccessfully suing the Canadian government over a request for dual nationality, Black renounced his citizenship (perhaps without much regret, given characterisation of Canadians as "whining, political conformist welfare addicts''), became a British subject and was subsequently received a peerage.

Hollinger spun off most of its remaining Canadian titles—notably 16 daily and 13 weekly newspapers such as the Kingston Whig-Standard, Timmins Daily Press and Sault St Marie Star—in an MBO by Osprey Media Group for C$220m. Osprey was headed by Michael Sifton, whose family had owned the Manitoba Free Press (subsequently the Winnipeg Free Press), Saskatoon StarPhoenix and the Regina Leader-Post. Osprey subsequently acquired other newspapers from CanWest.

Hollinger retained around 150 titles worldwide, of which 97 were in the Chicago area.

Black's Canadian rival, the multinational Thomson group, in mid-February 2001 had announced that it was essentially abandoning print in favour of electronic publishing and in mid-July 2001 disposed of its travel business for several billion dollars.

Black's Waterloo?

Black had faced recurrent criticism from 2000 about alleged disregard of the interests of other shareholders and management fees paid to Ravelston. Management fees as such were not unusual - they have been employed by several of the entrepreneurs featured on this site - and as Black noted were more tax effective than salaries or dividends.

Hollinger International reported a net loss of US$335 million in 2001 and US$238 million in 2002. In November 2003, following several months of speculation that Hollinger faced a financial crisis, Black resigned as chief executive of the group amid suggestions that some fees had been unorthodox (albeit perhaps not illegal) and not properly disclosed. Resignation coincided with announcement that the group was seeking advice about sale of assets.

Concern about fees, improper or otherwise, might have been more muted if there was good news about circulation and revenue. In 1985 the Daily Telegraph enjoyed daily sales of 1.2 million copies and the Sunday Telegraph had 687,000. By the end of 2003 the Daily Telegraph had fallen to 920,000, with the Sunday Telegraph up to 711,000. Critics noted that Murdoch's Times had climbed from 477,000 to 630,000 in that period, with the Sunday Times up from 1.26 million to 1.36 million. Peter Newman's Here Be Dragons: Telling Tales of People, Passion & Power (Toronto: McClelland & Stewart 2004) sniped that

Conrad had turned himself into a latter day Citizen Kane. He looked like a young Orson Welles but behaved like an old William Randolph Hearst.

In January 2004 Black lost support of the Hollinger International board and ceased to be chairman. The Barclays announced that they had an "irrevocable" agreement to buy Ravelston's 78% stake in Hollinger Inc and 73% voting stake in Hollinger International for £260 million, preempting action by the latter's board. That sale was characterised by some observers as an apparent significant discount on Hollinger's worth, eg what shareholders might expect to receive if the various assets were unbundled and sold. Such notions of value are contentious: we have noted that owners tend to be more optimistic than lenders.

It was suggested that the brothers, consistent with a reputation for secrecy and controlling-shareholder provisions in the US companies code, would seek to buy out other shareholders (presumably funded by offloading non-UK assets such as the Jerusalem Post and the US papers). The agreement, however, proved not to be irrevocable - complicated by litigation in the US and UK - and Hollinger International moved to auction off its assets through the Lazard investment bank.

Interest was expressed by Axel Springer, the Daily Mail and other groups before Lazard sold the Hollinger International UK titles (eg the Daily Telegraph, Spectator and Apollo) to the Barclays for some £665 million in July 2004. Apparent lack of interest resulted in the US titles and Jerusalem Post being taken off the auction block.

Ongoing litigation, reports and inquiries included a report to the US SEC by Richard Breeden for Hollinger International, claiming that Hollinger had been run as a "corporate kleptocracy", with

The aggregate cash taken by Hollinger's former chief executive officer, Conrad M Black and its former chief operating officer, F David Radler and their associates, represented 95.2 per cent of Hollinger's entire adjusted net income during 1997-2003.

Ravelston responded that the report featured "exaggerated claims laced with outright lies".

In November 2004 Hollinger International announced the sale of the Jerusalem Post to Israeli media group Mirkaei Tikshoret for US$13.2 million, with CanWest to acquire a 50% stake from that group.

A chronology is here.

The Barclays

The Barclays were born the sons of a travelling salesman in Hammersmith. After leaving school they worked as painters and decorators before trading and redeveloping property (holdings include London's Ritz hotel and the Hotel Mirabeau in Monte Carlo) during the 1950s and 1960s. After moving to the tax haven of Jersey they acquired the remnants of the Ellerman group (disposing of its shipping and brewery interests) and expanded into print.

Acquisition of Scottish newspapers such as The Scotsman and Edinburgh Evening News from Thomson in 1995 was initially successful, attributable to what has been described as ruthless cost-cutting and leadership by former Murdoch editor Andrew Neil.

Moves to acquire Scottish Media Group (SMG) were stymied - its print holdings went to Gannett for £216 million after SMG highlighted competition concerns. Activity south of the border - notably purchase of the European (launched by Robert Maxwell, acquired from Mirror in 1992 but closed in 1998) and Sunday Business, later rebadged as The Business - was less successful. In 2000 a £75 million offer to United News & Media (UNM) for the Express titles and Daily Star was rejected in favour of Richard Desmond.

In 2002 the Barclays paid for £750 million for the Littlewoods mail order operations of the Moores family, which had earlier disposed of its football pools interests. In 2003 they bought the mail order arm of the GUS group for £730 million. GUS - formerly Great Universal Stores under control by the Wolfson family - dates from 1900. It is best known for its Burberry, Argos and Lewis retail operations, along with Experion data services. The Barclay purchase encompassed mail order and logistics operations in the UK, Eire and Sweden, with sales in 2003 of £1.67 billion and operating profit of £35 million.

Holdings

An indication of Hollinger and Barclay print holdings is here.

Studies

Conrad Black: A Life In Progress (Sydney: Random House 1993) is an immensely admiring biography of the ex-Canadian mogul by noted journalist Conrad Black. It is full of scorn for journalists and business rivals, and recounts - at length - Black's cleverness in financial reengineering.

His prose can perhaps be better savoured in annual reports to Hollinger's shareholders, in public statements -

Fine-tuning Hollinger Inc to be a stable controlling shareholder would be simple in any environment less hostile than that created by the oversights of underlings and the character assassination effort of our enemies in the competing press

and email disclosed during litigation, such as -

Some ... think that we are running a gravy train and a gerrymandered share structure, and we think they are a bunch of self-righteous hypocrites and ingrates, who give us no credit for what has been a skilful job of building and pruning a company in difficult circumstances.

A less reverent and more succinct portrait is given by Richard Siklos in Shades of Black: Conrad Black & the World's Fastest Growing Media Empire (New York: Touchstone 1998) and the incisive The Fall of Conrad Black (London: Allen Lane 2004) by Jacquie McNish & Sinclair Stewart. Other works include Lord Black: The Biography (Montreal: BT Publishing 2004) by George Tombs - marketed as "by the only journalist who had unprecedented access to the man himself!" - and Democracy's Oxygen: How Corporations Control the News (Toronto: Black Rose 1997) by James Winter.

An earlier rendition is provided by Peter Newman's The Establishment Man: A Portrait of Power (Toronto: McLelland & Stewart 1982), centred on the Argus takeover and gentler than the 2004 Here Be Dragons: Telling Tales of People, Passion and Power or Tom Bower's Conrad and Lady Black (London: HarperCollins 2006). Newman was hit with a US$1.8 million defamation suit by Black in November 2005, charging that he had falsely and maliciously written that the mogul

engaged in a wide range of criminal acts spanning many years, including mail and wire fraud, interstate transportation of stolen property and money laundering.

Newman subsequently commented that

Since the quote Conrad Black found so offensive is taken from a court document, and in my book is contained within quotation marks, I am puzzled why he launched a suit against me, particularly since within hours, he was indicted on some of the same charges.

Maude Barlow & James Winter's The Big Black Book (Toronto: Stoddart 1997) may strike some readers as perhaps as self-righteous and shrill as the great man himself, who had commented to Siklos that his success in the UK was attributable to cutting non-editorial costs and

presenting Britain's gamiest, kinkiest, most salacious, and most scatological news with apparent sobriety, but with the most explicit, almost sadistic detail (involving) the indiscretions of deviant clergy, the activities of paid flagellators, and the rest of the vast English supermarket of unconventional sexual titillation.

In 2000 he more pithily described Roman Catholic archbishop Frederick Henry of Calgary as a "jumped-up little twerp of a bishop" for criticising Black's union-busting. Black's dissatisfaction with much of humanity - in particular regulators and employees - is a trait shared with many of the leading magnates and as a guest or partner he appears greatly superior to Maxwell. Few, however, were as articulate or as injudicious in making public statements; few of Northcliffe, Pulitzer or Scripps' denunciations seem to have been disclosed to the public at large.

There is an adoring account by Nicholas Coleridge in Paper Tigers (London: Heinemann 1993) and a more recent profile in Michael Wolff's Autumn of the Moguls (New York: HarperCollins 2003). Ego and Ink: The Inside Story of Canada's National Newspaper War (Toronto: McClelland & Stewart 2004) by Chris Cobb covers Black's establishment of the National Post, its acquisition by the Aspers and battle with the Globe. The 2004 Breeden report to the SEC is essential reading; its conclusions have been disputed by Ravelston but inspired action by the SEC against Hollinger International directors. Earlier concerns were expressed in the 1975 Canadian Royal Commission on Corporate Concentration study Argus Corporation Limited - A Corporate Background Report.

Black's Duplessis biography is unfortunately out of print. His 1,360 page Franklin Delano Roosevelt: Champion of Freedom (New York: Public Affairs 2003) was apparently penned as Ravelston unravelled.

There has been no major biography of the Barclays, often characterised as "secretive" and "enigmatic". Andrew Neil's Full Disclosure (London: Macmillan 1996) unfortunately doesn't extend to his adventures with the brothers, instead assailing former employer Rupert Murdoch.

Perspectives on the rise and fall of Hollinger are provided by Robert Picard's lucid The Economics & Financing of Media Companies (New York: Fordham Uni Press 2002) and The Rise & Fall of Communication Empires (PDF). A vantage point on Black's proprietorship of the Daily Telegraph is provided by Max Hastings in Editor: A Memoir (London: Macmillan 2002).

For Southam and its antecedents see Marc Edge's impassioned Pacific Press: The Unauthorized Story of Vancouver's Newspaper Monopoly (Vancouver: New Star Books 2001), Douglas Fetherling's The Rise of the Canadian Newspaper (Oxford: Oxford Uni Press 1990), Minko Sotiron's From Politics To Profit: The Commercialization of Canadian Daily Newspapers, 1890-1920 (Montreal: McGill-Queen's Uni Press 1997) and Paul Rutherford's The Making of the Canadian Media (Toronto: McGraw-Hill Ryerson 1978).