Filling the Black hole

The mood inside the Telegraph building is nervous. But could a management buy-out save the day for the troubled newspaper? Tim Luckhurst reports

If journalists at The Daily Telegraph choose to seek advice about their present dilemma, they might do it in the form of a letter to Mary Killen, the official "Miss Manners" of that other Hollinger property, The Spectator, and author of the weekly "Your Problems Solved" column. Given the mood at the Telegraph, such a letter might go like this:

Dear Mary,

Our proprietor, an eccentric and forceful fellow with expensive tastes in spouses, houses and aeroplanes, may be obliged to sunder his association with our newspaper. Much though he is despised and ridiculed by liberal commentators, he is a very decent owner who understands our traditions and restricts his interference in our journalism to occasional crusades against the BBC and regular letters pointing out the ideological error of articles we have published. I am concerned that, if he does depart, we may find we have got rid of nurse only to be faced with something worse. How should we respond to the acquisitive ambitions of an adult-magazine chief who has made contributions to the ungodly cause of socialism?

Mary might well advise a blunt and dismissive snub. That is the approach being taken by several senior figures at The Daily and Sunday Telegraph. They insist that they will not even discuss the prospect of Richard Desmond acquiring the Hollinger titles, because to do so "is too unsettling from the perspective of staff morale" and "the last thing people here want to contemplate".

Over at The Spectator itself, the staff are a little bolder. One source says: "There is a lot of sympathy here for Conrad Black. Of course, the occasional wry joke is being made. We are not unaware of the schadenfreude his problems have nourished. But we are not gloating. We fear that something not entirely nice has happened to him. He has been a very successful proprietor and, though many of us disagree with him on many issues, he gave us a genuinely free hand to publish what we like."

So, a courageous defence of the ancien regime, but is it mixed with acceptance that the sale of Hollinger's British titles is inevitable? Not quite. The source says: "My instinct is that we are going to be sold, but I hear that it is remotely possible that Hollinger may hold on to us." What does seem certain, though, is that Black himself will no longer be involved.

One insider says: "The only mood I can discern is one of nervous apprehension. Lord Black may have had his views, but they did not permeate down to the shop floor. We are not confident that a new proprietor would be so punctilious." Another responded to the threat of a bid by Desmond by sending an e-mail to a well-connected friend, asking, "Can you persuade Associated to buy the Telegraph? There is massive panic over here about Dirty Des." One Spectator columnist confirms that, insisting: "If Richard Desmond bought us, a lot of people would quit and a lot of columnists would simply walk away."

That remains a distinct possibility. As does a purchase by Associated Newspapers, owner of the Daily Mail, Mail on Sunday, London Evening Standard and Metro. The latter would meet with enthusiasm from Telegraph staff. They consider Associated a potential white knight, ideologically friendly and wealthy enough to wrest them from a fate they dread. Associated Newspapers appears to share their enthusiasm. The group is expected to make a serious bid, but there are concerns that its frosty relations with the Government could prove a handicap during referrals to the Competition Commission. But the belief that the Telegraph titles and The Spectator will fall into the hands of Desmond, Associated Newspapers or any of the bidders assembling teams is based on a premature assumption that Hollinger has no choice but to sell. That, as the Spectator source hints, is not yet a certainty.

Analysts close to senior Hollinger executives, untainted by the furore surrounding Lord Black, tell a different story. They recognise that the sale of all the Hollinger newspapers as one group may become inevitable. It would be a practical way of disposing of unprofitable elements inside a package made attractive by theTelegraph titles. But that would require a convincing bid for all Hollinger's newspaper assets, not just a desire to acquire the British titles. Unless a "knockout offer" is made, disposal is not the primary objective of influential executives at Hollinger. They are passionate about retaining ownership and keen to retain the Telegraph titles and The Spectator.

Dan Colson, the Telegraph Group's chief executive and now chief operating officer at Hollinger International, says: "Our preference is not to give up control of any of our newspapers. There are three options, and one of them is to re-capitalise the company. That is not remotely impossible to do." Colson says the other options are: "We could sell some of the assets, and if the right offer were made, we could sell the entire newspaper group. We have appointed Lazards to look at the offers we are likely to receive, and until that process is completed, we do not know what the outcome will be." Colson acknowledges that, commercial logic permitting, he would like to retain control of Hollinger's British newspapers.

One analyst says: "Dan Colson believes in the Telegraph and The Spectator. He is not a sentimental type, but there is evidence that his preferred solution is to keep them together and keep them inside Hollinger."

At The Spectator, that is the preferred option, but there is a fallback position. It is suggested that, if Hollinger proves unable to retain its British publications, a management team consisting of Spectator executives may attempt a buy-out in order to preserve its independence. They believe that the Government is hostile to any purchase by Desmond. A City source said: "Certain ministers do not want Desmond to have the papers. That has been made clear to Hollinger at Cabinet level."

ONLY $16M TO LIVE ON NOW...

Lord Black and his wife, Barbara Amiel, have enjoyed the lifestyles of billionaires. But unless the Tory peer has other wealth salted away, the sale of his Hollinger empire could leave him with only a few million dollars to his name.

Analysts estimate that Hollinger International, the company that owns The Daily Telegraph, The Sunday Telegraph and the Chicago Sun-Times, will fetch no more than $1.7bn. Although Lord Black controls more than 70 per cent of the voting rights in the company, he is likely to reap just $116m of that, after servicing debts. Then he faces demands from shareholders to repay about $100m to cover payments that they say he improperly received over the years. The Tory peer's chief tormentor has been a New York-based shareholder called Tweedy Browne. Chris Browne, its managing director, says: "Conrad Black may live like a billionaire, but anyone who thinks he's a billionaire hasn't done their maths."

Black and his wife may struggle to survive on $16m. Amiel once said she had an "extravagance that knows no bounds". There is sympathy from Browne, who comes from old East Coast money himself. "There is nothing worse in life than downward mobility," he says.

Saeed Shah