Canada's top securities regulator blocked Conrad Black's bid to take holding company Hollinger Inc private on Monday, dealing the fallen press baron the latest in a series of stinging setbacks. The Ontario Securities Commission said that following a three-day hearing on the matter last week, it did not conclude it would be fair and in the public interest to let shareholders vote on the offer at a March 31 special meeting.
After the commission's ruling, Hollinger said it cancelled the meeting. Black, through his closely held Ravelston Corp, had offered C$7.60 per share, or about C$58 million ($48 million), to buy the 21.7 percent of the Toronto-based Insurance company he does not already control.
Hollinger Inc shares closed down almost 7 percent, or 45 Canadian cents, at C$6.35 on Monday in Toronto on thin volume.
Analysts had said Black likely wanted to secure full control of Hollinger Inc to better position himself for upcoming legal battles. But the Canadian-born member of Britain's House of Lords first had to persuade the Ontario regulator to lift a cease-trade order it imposed last year on Hollinger Inc insiders. It refused to do so.
In its ruling, the regulator noted that Hollinger Inc has not filed audited financial statements for 2003 or 2004 and it questioned the value of an independent valuation done of the offer.
Black had sent an e-mail to a Hollinger Inc independent director asking that it be made clear to the head of the investment bank doing that valuation that "he won't get his million dollars unless he produces something that works for the company."
The regulator noted that not even Hollinger Inc's independent directors, who have said on the record they felt threatened by Black, had recommended the offer.
"When a related party attempts to exert undue influence, examples of which are set out above, and regardless of whether such apparent attempts are successful, shareholders' confidence in the integrity of the safeguards may, justifiably, be undermined," the ruling said.
"On a macro level, such conduct, if tolerated or condoned through an exercise of discretion in favour of the responsible party, serves to undermine confidence in the fairness and integrity of the capital markets overall."
Hollinger Inc's board said in a statement it was reviewing the decision to determine whether the special shareholder meeting will "proceed in the circumstances."
Ravelston said the decision denied Hollinger Inc shareholders the opportunity to determine for themselves what is in their best interests.