The events had all of the elements of a classic Fleet Street story: a venerable British-owned business fighting desperately to avoid being swallowed up by a brash young foreigner. But this time the takeover target was one of Fleet Street’s own —the 130-year-old Daily Telegraph, the staid and patriotic unofficial flagship of Britain’s governing Conservative party. After weeks of painstaking negotiations, the financially troubled newspaper published a brief front-page announcement last week confirming that control of the Telegraph and its sister publication, the Sunday Telegraph, had passed into the hands of Toronto millionaire Conrad Black, 41, chairman of Argus Corp. Said Black: “It is one of the world’s greatest newspapers. It is an honor and a challenge and a responsibility.” For his part, Telegraph chairman Lord Hartwell, 74, who struggled for months to hang on to the private, family-owned business, declared, “It is the best that could be done in the circumstances.”
Black, who paid a total of $60 million for 50.1 per cent of the Telegraph, is the third in a succession of Canadian-born millionaires to acquire a chunk of Fleet Street. The first, financier Max Aitken, later Lord Beaverbrook, owned the Daily Express from 1916 until his death in 1964. He was followed by newspaper-chain owner Roy Thomson, later Lord Thomson of Fleet, who bought The Times of London in 1966, although his son Kenneth subsequently sold the paper to Australian newspaper magnate Rupert Murdoch in 1981.
Despite that tradition, in the days leading up to the takeover announcement the British media cast Black as a brash intruder. The Times, for one, referred to what it called Black’s “swashbuckling business style” and “Genghis Khan reputation”—a sharp contrast to the shy and aloof Lord Hartwell, who, the paper said, “commands the respect and affection of other Fleet Street proprietors.” But, said Black: “I think the whole thing has gone quite smoothly. I haven’t been hassled at all. I am, after all, a foreigner to them.”
Black’s arrival will certainly herald profound changes at the moribund
Telegraph. For years journalists at the money-losing newspaper have complained about the management’s stubborn resistance to change. At the same time, the newspaper has been crippled
by Fleet Street’s fabled industrial relations problems and out-of-date production methods. And the paper has lost readers to two of its rivals among Britain’s so-called “quality” dailies. In the past 20 years both The Times and The Guardian have seen their circulations increase from about 250,000 copies a day to the current level of about 500,000 each, while the Telegraph has slipped from a peak of 1.4 million to slightly more than 1.2 million copies.
As a result, many analysts expected Black to move quickly to bring fresh blood into the Telegraph's management. Indeed, his first act as owner was to name Andrew Knight, 42, the highly respected editor of the Londonbased weekly newsmagazine The Economist, as the chief executive of both the daily and Sunday newspapers—at
a salary of $200,000. Under the terms of the newspaper’s sale, Lord Hartwell will retain his position as chairman and editor-in-chief of the Telegraph but, according to Black, he will not be an active executive. Daniel Colson, a London-based partner with the law firm Stikeman, Elliott who helped to negotiate the purchase for his longtime friend Black, said: “How long Lord Hartwell remains in that position is entirely up to him. Mind you, he is 74 and he is not in the best of health, so you have to wonder.”
Last week’s sale of the Telegraph to Black marks the culmination of a series of financial setbacks for the Berry family, which had owned the newspaper since 1928. Last spring Lord Hartwell embarked on a costly modernization of the newspaper’s printing facilities and financed the venture with bank loans totalling $160 million. Lord Hartwell then looked for outside investors to contribute new capital worth another $60 million.
Close associates of Black told Maclean's last week that the Toronto-based financier decided to buy into the newspaper last June after consulting a longtime friend and financial adviser, Rupert Hambro, chairman of Hambros Bank Ltd. of London. But Black credits his old friend Knight with introducing him to the Telegraph's underwriters, N. M. Rothschild, who were looking for someone to “top up” a financing package with some equity capital. To settle the terms, Lord Hartwell boarded a British Airways supersonic Concorde jet and flew to New York’s John F. Kennedy airport, where he met with Black. The two men agreed that the Canadian financier would pay $20 million to acquire a 14-per-cent stake in the company. In addition, Black retained the right of first refusal on any new shares issued or any shares the Berry family decided to sell.
By last month it became clear that Lord Hartwell’s modernization gamble had backfired. For one thing, the newspaper lost $32 million in the six months ending Sept. 30, although ear-
lier it had been expected to make a $10-million profit. As well, Hartwell had badly underestimated the amount that would have to be spent on severance payments in order to rid the paper of surplus printing staff. In some cases unionized workers were entitled to as much as $90,000 each, leaving the Telegraph with a total bill of more than $75 million.
Faced with increasing pressure from the company’s bankers to find new capital, Lord Hartwell approached Black last month and asked him to put
up more money. At first, Black refused. But earlier this month Black gave the Berry family an ultimatum. Unless they agreed to give him majority control of the Telegraph, Black said, he would pull out of the company and put his own shares up for sale.
Said one Telegraph insider of the Berry family’s dilemma:
“They all hung on and now it’s all crumbling. It is the classic tragedy of a family business.”
But despite the desperate situation,
Lord Hartwell’s younger son, Nicho-
las Berry, 42, a director at the paper, strongly opposed the sale and tried desperately—but without success—to find other investors. For his part, Colson told Maclean's: “We have no doubt at all that shares in the Telegraph were flogged all over hell’s half acre by Berry. But in the end we were the only serious buyers.” Black himself said his relationship with Lord Hartwell was “excellent.”
At the Telegraph, the staff reacted to Black’s purchase with cautious optimism. Said one senior correspondent
who has been on the newspaper’s staff for 20 years: “At this point, any change at all has got to be viewed as a change for the better.” But several employees expressed concern about Black’s reputation for outspokenness — particularly his barely concealed contempt of journalists.
Privately, Black has spoken admiringly of a new breed of newspaper publisher, including Rupert Murdoch and Eddie „ Shah, who are trying I to revolutionize Fleet Street (page 45). z Black says that the I lure for him is partly
“to have access to an authoritative, respected and influential newspaper and to have an impact in two general ways: one, to ensure the paper continues to be a quality operation, presenting things fairly; and two, to be able to get something off my chest, although I would do that under my own name.” He added: “I’m not trying to become a figure of influence in the United Kingdom. I wouldn’t try to influence the writers.”
For his part, Hambro said that Black does not intend to become involved in the day-to-day operations of the Telegraph. Said Hambro, who has known Black since the two men met over lunch in Toronto in 1965: “Conrad is a Canadian and he has told me on many occasions that he wants to continue living in Canada. He isn’t a Lord Beaverbrook or a Thomson inasmuch as they moved to London and were actively involved in running their papers.”
Hambro also dismissed speculation that Black intends to use the Telegraph as a platform for his outspoken conservative views. He said, “Conrad is not a philanthropist in the sense that he would spend a good deal of money simply to advance a political cause.” But for those who know Black, the suspicion remains that the acquisition is not so straightforward. “He has got a sense of history and destiny and all that stuff,” said one former partner of Black’s. “And newspapers are an extension of the personality. There is another dimension besides money.”
Still, most analysts said that Black’s purchase of the Telegraph appeared to be based on sound financial judgment. The newspaper’s accountant estimated earlier this year that, because of a series of planned staff cuts and the move to modern presses, the company’s profits should be in the range of $40 million a year by 1988 or 1989. But Colson said last week that the Telegraph's $160-million debt meant that the newspaper was still a decidedly risky purchase. Declared Black: “It was a good buy, although it is a bit speculative.”
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