Hollinger sell-off is falling apart

EMBATTLED media firm Hollinger International is in danger of selling the crown jewels and leaving the rest of the group barely viable, analysts warned as the company ordered investment bank Lazard to focus on the sale of the Dail and Sunday Telegraph operations alone.

The Hollinger board appears to have given up hope of a single sale to one bidder after it received no offers for all of its assets as a single package, and accepted it will have to engineer a piecemeal break-up of the group.

But the Telegraph disposal will leave it with an incoherent collection of local US papers, the Jerusalem Post and the Chicago Sun-Times group, that makes little sense as a single business.

While the unprofitable Jerusalem Post presents special problems, Hollinger originally hoped to get as much as $1bn (£552m) for the Chicago titles. They include the Sun-Times, two suburban dailies and three groups of suburban weeklies.

'The board is going to have to come up with a good story to tell investors or else sell off the remaining assets pretty fast - and either option doesn't look easy,' said one analyst.

The company says while it now expects to sell only the Telegraph titles and The Spectator in the current auction, the sale would only go through if the price is right.

German publisher Axel Springer is said to have been ruled out of the bidding because its offer was too low. That leaves the Barclay brothers, Daily Mail and General Trust (owner of This Is Money), venture capital group 3i and private equity investors Candover Investments and Apax.

The only plausible bid for all the group's assets would have been from buyout specialist Kohlberg Kravis Roberts. But the firm backed away when the legal position of Henry Kravis's wife - a Hollinger director when the company made controversial payments to Black - was questioned.

Insiders say bids range from $600m to $700m. Lord Black said Hollinger Inc, his holding company which owns a 72% voting stake in Hollinger International, will 'look at anything that makes sense' when it comes to a sale.

Although it seems inevitable Hollinger International will put its other assets up for sale, it is not clear how quickly it may decide to do so. But analysts warned against turning it into a fire sale.