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Sir Frederick and Sir David Barclay have agreed to buy the stake from Lord Black of Crossharbour for £259 million.
However, in an attempt to thwart the deal, Hollinger International approved a “poison pill” rights issue, which would heavily dilute the Barclay brothers’ shareholding in the company.
The directors of Hollinger said its corporate review committee unanimously approved the “poison pill”.
However, Lord Black on Friday disbanded the committee, using a Delaware bylaw.
Hollinger claimed that Lord Black did not have this power and took its case to a court in Delaware. Lord Black hit back, calling the move a “descent into the lawless conduct of corporate affairs”.
The company also filed suit to block Lord Black’s proposed sale of his stake to the Barclays, saying it did not benefit shareholders. The directors argued he should be prevented from proceeding while his “liabilities to the Company are under investigation and in dispute”.
Lord Black is under investigation by the US Securities and Exchange Commission regarding fees Hollinger International paid him and he has been sued by the company.
Professor Charles Elson, professor of corporate governance at the University of Delaware, said Lord Black’s legal move on Friday was “extraordinary”.
He expected that a judge will be sympathetic to the directors. He said: “Judges are human too. The overall story will have an impact on how the judge views the specifics of the case. They are known for supporting the decisions of the independent directors.”
Lord Black has appeared a step ahead of International to date, thanks in no small part to his lawyers, who are among the best in the country.
He has retained David Boies and John Warden of Sullivan & Cromwell. Hollinger International has retained Paul, Weiss, Rifkind, Wharton & Garrison, a firm that is well-known in the entertainment world and also defended junk bond king Michael Milken.
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