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Conrad Black Likes A Good Fight And He's Getting One


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CONRAD BLACK LIKES A GOOD FIGHT--AND HE'S GETTING ONE

In a characteristic display of his tip-top connections, Canadian newspaper mogul Conrad M. Black recently hosted a glittering dinner party at London's Spencer House, the spectacular ancestral home of Princess Diana. The guest list of several dozen luminaries included Sir James Goldsmith, former NATO Secretary-General Lord Carrington, and former Federal Reserve Board Chairman Paul A. Volcker. After dinner, the speaker was former British Prime Minister Margaret Thatcher.

But on the very night that Black was being toasted in London, he was being skewered in Australia. On Oct. 16, nearly 500 striking journalists in Sydney were busy handing out thousands of inflammatory handbills titled "A Black Day for Australia." The reason for their ire: Black's bid for John Fairfax Group Ltd., owner of Australia's three most influential newspapers -- The Sydney Morning Herald, The Age, and The Australian Financial Review.

The protesting employees fear massive layoffs and a rightward shift in the papers' editorial direction. They're also fretting about the media clout of Black's partner in the bid, magazine and broadcasting giant Kerry F. Packer. Dozens of politicians have joined the fight, including former Prime Minister Malcolm Fraser, who contends that Black "is not a proper person to own media in Australia." Black accuses his critics of spreading "terrible disinformation."

This is not the first time Black, 47, has stirred up violently contrasting opinions. But even his staunchest critics concede that he has an impressive eye for opportunity. Since 1985, he has bought and rejuvenated The Daily Telegraph, Britain's largest upmarket or "quality" paper; beaten out Robert Maxwell for control of The Jerusalem Post; and built American Publishing Co. into what analyst John Morton calls "the fastest-growing newspaper chain in the U. S."

PLENTY OF CASH. Black's main company, Hollinger Inc., now publishes 91 daily newspapers, mostly in the U. S. and Canada, with a combined circulation of some 2 million (table). Even archrival Kenneth R. Thomson, the billionaire chairman of Toronto-based Thomson Corp., says Black has done a "remarkable" job. Black revels in the newspaper business for several reasons. A voracious reader, he boasts a library of 16,000 books. He's also extremely interested in public policy, and newspapers give him a perfect vehicle to express his conservative views. Final-ly, newspapers have made him piles of money. His controlling stake in Hollinger is worth around $250 million, about three times its value in 1985.

To keep expanding, Black aims to tap Hollinger's rich cash flow, which reached $111 million last year. "Unlike some other media companies, we don't want to overstretch ourselves," Black says. Then he had better be careful. While revenues have tripled since 1986, to $703 million, the savage media recession is taking a toll. In the first six months of the year, Hollinger's operating earnings were down 30%. With debt, including convertible debentures, of $615 million, Black's debt-to-capital ratio is already near 60%. Still, he is confident he can conquer Australia, as his stake in Fairfax would require borrowing only about $50 million.

Black arranged a formidable consortium to bid for Fairfax, which was placed in receivership last December after an LBO collapsed under $980 million of debt. If the bid succeeds, The Daily Telegraph will pay $71 million in cash for a 20% stake. Packer, Australia's wealthiest man, would have 15%, and public shareholders 65%. But Black's group, dubbed Tourang, faces strident opposition from the Independent Newspapers PLC consortium, led by H. J. Heinz CEO Anthony J. F. O'Reilly, and Australian Independent Newspapers, a group of businessmen and institutional investors.

The secret bids all are thought to be around $1 billion, but Black's group may have a financial edge. Some 95% of Fairfax' junk-bond holders -- including Credit Lyonnais and Prudential Insurance Co. -- have agreed to swap their bonds for debentures in Tourang if Black prevails.

RIGHT TURN. But the Black-Packer bid is most controversial politically. Critics contend that Packer should not be allowed to increase his media role further. And Black has been vilified as a foreign interloper. "If you like strong-minded, interventionist proprietors with Thatcherite views, he's your man," says O'Reilly. Black's enemies cite the sharp rightward shift taken by The Jerusalem Post, Israel's major English-language daily, after Hollinger's takeover. More than 20 senior staffers resigned in protest.

But Black, who relaxes by reading military history, is waging a vigorous counterassault. Following the handbill incident in Sydney, he sued four journalists for defamation. He has Henry Kissinger, a member of Hollinger's international advisory board, putting in a good word for him with Australian Prime Minister Robert J. Hawke. And Black is attacking the "outrageous myth" that he dictates editorial policy.

It's not hard to imagine being intimidated by Black. Heavyset and stern, he doesn't suffer fools at all. He can be contemptuous of journalists. Asked by BUSINESS WEEK if he would pose for a picture in his library, the media baron snapped: "I won't have the press in my home!" He is famously quick to sue for libel. Black has a suit against the publishers of God's Dominion, a 1990 book on religion in Canada that mentions him only briefly. "The passage states that I have contributed to the sum total of human misery," he complains, calling it "monstrous defamation."

Black has had a maverick streak since he was a boy. The son of a brewing executive, he was expelled from Toronto's elite Upper Canada College after he and two other students stole copies of upcoming final exams and sold them to other students. "It was an oppressive school -- they didn't spare the rod -- and I rebelled against it," says Black. "It doesn't embarrass me."

It certainly didn't slow his meteoric rise. After earning degrees from Carleton, McGill, and Laval Universities, Black began readying himself to wrest control of Argus Corp., then Canada's premier holding company. Black and his brother Montegu had inherited a 22% stake in Ravelston Corp., which controlled Argus, from their father. When Argus Chairman J. A. McDougald died in 1978, Black used this stake to mount a successful bid for control.

Black restructured and sold off virtually all of Argus' assets, including tractor giant Massey-Ferguson and Dominion Stores. When he withdrew some $55 million in surplus funds from Dominion's pension fund in 1986, he was renounced by the unions, though other companies had done the same. Bob Rae, now Ontario's Premier, blasted Black as a "representative of bloated capitalism at its worst" -- a charge he called ludicrous. Argus' stock soared, boosting the value of Black's stake from $1.5 million in 1978 to $80 million by 1985.

SHREWD DEAL. Black turned his attention to newspapers in 1969, when he bought a small paper in Quebec. His biggest challenge came 17 years later, when he gained control of the London-based Daily Telegraph. It had lost 300,000 readers in the previous five years, to 1.1 million, and was hemorrhaging up to $3.5 million a month. The debt-to-equity ratio was a horrific 4 to 1.

Drastic changes followed. "Every aspect of the business, from A to Z, was changed," says Deputy Chairman Sir Frank Rogers. The staff was cleaved from 4,000 to 1,500, much of the long-separate daily and Sunday staffs were combined, and the paper was redesigned for younger readers. It was a stunning success: Operating losses of $17.5 million in 1986 became last year's $78 million profit. Considering Hollinger paid a mere $53 million for control of a paper Rupert Murdoch recently said was worth $1.5 billion, it appears that Black pulled off one of the shrewdest media deals in years.

Now, he's waiting to see if his Australian bid will succeed. Even if he loses, he'll surely buy papers elsewhere. He desperately wants a more visible U. S. property. He would like more papers in Britain, and he's eyeing Latin America and South Africa. When asked why he keeps buying papers, Black quotes press baron Roy Thomson: "To make money." And why does he want more money? "To buy more newspapers."

HOLLINGER'S

MEDIA EMPIRE

THE DAILY TELEGRAPH A leading quality newspaper in Britain, with circulation

of 1.1 million

AMERICAN PUBLISHING Fast-growing U.S. newspaper chain with 77 dailies and 54

weeklies. Total paid daily circulation of 477,000

UNIMEDIA Three daily French-language newspapers in Quebec, plus more than a

dozen weekly papers in Canada

STERLING NEWSPAPERS Publishes daily and weekly papers in British Columbia and

Prince Edward Island

THE JERUSALEM POST English-language daily in Israel with circulation of

22,000; international weekly circulation of 55,000

OTHER HOLDINGS Britain's The Spectator and Canada's Saturday Night magazines;

15% of Canada's The Financial Post; 9% of United Newspapers, publisher of

Britain's Daily Express

DATA: BWWilliam C. Symonds in Toronto, with Richard A. Melcher in London, Stephen Hutcheon in Sydney, and bureau reports


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