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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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 Contd...
Hollinger International - A New Beginning?
HII filed its 2003 annual report in January 2005 after a delay of almost a year. Analysts reported that HII had spent around $57 million in legal and other costs in the years 2003 and 2004. It reported a loss of $74.3 million in 2003 (Refer Exhibit III for income statement of HII).
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The stock price of HII fell following the declaration of losses. (Refer Exhibit IV for comparison of HII stock performance vis-à-vis the Dow Jones Industrial Average Index). In light of the damages accrued to shareholders, HII decided to give $500 million back to the shareholders as compensation. They decided to do this by offering a special dividend and stock buyback. For this purpose, HII opened an escrow account in January 2005 and transferred out some of the funds resulting from the sale of
The Telegraph. On January 18, 2005, HII paid the first special dividend amounting to $227 million to its shareholders. On January 27, 2005, it announced a second dividend of $273 million. At the same time, HII
formally announced the appointment of Paris as its CEO and Chairman.
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According to media sources, Paris said that the company would continue to focus on increasing shareholder value.
Earlier, in June 2004, when Paris was the interim Chairman and CEO, HII had negotiated an agreement with Donald J. Trump (Trump), CEO of the Trump Organization, which allowed Trump to acquire HII's interest in 'The Trump International Hotel and Tower' in Chicago, a joint venture project between HII and Trump Organization, for $73 million.
This was part of HII's efforts to focus on its core publishing business and also support its cash flows through sale of assets.
Hollinger, the holding company of HII, also adopted new corporate governance policies to start afresh.
These included amending the code of business conduct and ethics, a written charter for all committees of the Board, and policies on related party transactions and whistle-blowing policies...
Exhibits
Exhibit I: Alleged Fraudulent Activities by Black and His Associates
Exhibit II: Board of Directors of HII in 2002
Exhibit III: Income Statement of HII
Exhibit IV: Comparision of Hollinger International Stock (HLR) Vis-À-Vis Dow Jones Industrial Average Index (DJI)
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