Hollinger International: The Lord Black Saga
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Case Details:
Case Code : BECG053
Case Length : 15 Pages
Period : 1999 - 2005
Pub. Date : 2005
Teaching Note : Available
Organization : Hollinger International Inc.
Industry : Publishing
Countries : Canada, US, and UK
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
The Downfall of Lord Black
The year 1999 witnessed the beginning of the troubles at HII, in spite of its good revenues.
National Post, its Toronto newspaper, reported losses of $44.3 million. The acquisition spree of HII was beginning to take its toll and it had built up a massive debt.
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To bring down the quantum of debt, Black sold 40% of HII's assets that included almost all the Canadian newspapers and many of those in the US. HII's biggest deal was with CanWest, a Winnipeg-based television company, generating $27.8 million non-compete payments to Black, Radler and two other top executives. After the Twin Towers disaster on 11th September 2001, all HII's newspapers took a beating in revenues. The operating income of the Chicago-area papers fell by 70% to $10 million. Jerusalem Post made a loss of $3 million. The Telegraph and its sister publications had a drop in revenues from $89 million to $31 million. HII paid out $1 billion from the CanWest deal towards loan repayments...
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Other Allegations Against Black
The Special Committee, with Paris as Chairman, Graham W. Savage and Raymond G.H. Seitz, aided by Richard C. Breeden & Co., the law offices of Breeden, filed a detailed report with SEC dated August 2004.
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The committee stated that through the years 1997-2003, Black and his affiliates took more than $400 million from the company, which was around 95.2% of HII's adjusted net income during that period (Refer Exhibit I for a brief note on the activities of Black and his associates). The committee investigated a lot of deceptions in the financial dealings of HII, including the initial complaints on management fees and non-compete payments. The following sections contain a synopsis of Black's practices.
Management fees
Black never took a salary from HII. Instead, he and his associates took a portion of the management fees paid to RMI... |
Excerpts Contd... >>
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