Long haul for the Barclays

POSSESSION, it is said, is nine-tenths of the law. On this basis alone Sir David and Sir Frederick Barclay are well on their way to becoming the proud proprietors of one of the world's largest newspaper groups including the Telegraph titles.

The brothers acted with speed, boldness and opportunism. Their purchase of Lord Black's stake in Hollinger Inc for £260m exploited the end of a two-week standstill agreement during which Black undertook not to disgorge any assets.

Whether the Securities & Exchange Commission, which itself sought to protect the assets in a Chicago court late on Friday, will see the sale so benignly is still unknown.

It is not the first time that the Barclays have launched an unconditional offer.

Last year they bought mail order companies from GUS for £590m in the hope that they could mesh them with their own Littlewoods business.

Unfortunately, the Office of Fair Trading and then the Competition Commission did not see the shrinking agency-mail order business in the same way as its new owners and launched an investigation. The report is with the DTI.

The Barclays may now have a long wait to see if they can secure the newspaper titles owned by Hollinger International - the Telegraph, Sunday Telegraph, Jerusalem Post, Chicago Sun Times and the Spectator. Claims that ownership has been clinched are too early.

Lawyers and regulators have been crawling all over Hollinger companies since autumn and in the sensitive post-Enron world they are unlikely to let go.

Richard Breeden, the former Securities and Exchange Commission chairman now heading Hollinger International's 'special committee' will continue his work, including efforts to reclaim $200m of missing funds.

Investigations by the SEC and other authorities will not stop because of change of ownership.

No one is now quite sure where decision-making power rests. Is it still with the Hollinger board, which includes several Black loyalists, including Henry Kissinger, the former US secretary of state, and Richard Perle, a member of President Bush's defence policy board?

Is it with the 'special committee' which has board authority to clear up the mess? Is it with the Barclays, who have acquired 70% of the votes, but only 30% of the equity?

Or is it with activist shareholders like Tweedy Browne, which will be determined on behalf of its clients to get the best price for its 70% economic stake in the company?

The assumption must be that these institutional shareholders, which were fully behind the auction of assets being organised by Lazards, want the best price. They will have to decide in the end whether a simple, clean sale to the Barclays - if they seek to buy up the minority - is preferable to a break-up and sale of the kind envisaged by Lazards.

The investment bankers had decided to sell the Telegraph newspapers as one package and the other assets separately to obtain the maximum price.

In the City an open auction of assets produces the best outcome for investors. The attraction of the Barclays is that the regulatory risk would be far less.

Although the jury is out on their stewardship of their present titles, these, including The Scotsman, are unlikely to be a blocking factor for either Ofcom, the media regulator, or the Office of Fair Trading.

But given the possibility of endless litigation, it may be a long haul before the Telegraph titles find safe harbour, despite the Barclays' weekend coup.

Morrison‘s challenge

MORRISON Supermarkets, having produced impressive 10.2% sales figures for the holiday season, would appear to have a formidable task ahead in turning around Safeway.

In the third quarter Safeway sales fell 4.1% after a 2.5% drop in the first half of the year.

The uncertainty over Safeway's future must have affected management and staff throughout 2003, and there is no immediate reason for Morrison shareholders to feel concerned about their £3bn quarry. Indeed, they may have bagged the bargain of the century, given the real value of Safeway's edge-of-town stores.

There is no reason to believe that Safeway customers will not enjoy the better prices and home-manufactured grocery that has kept Morrison up with the leaders of the retail pack.

If there is a downside it is that Morrison has decided that it does not want two Safeway directors, Lawrence Christensen and Jack Sinclair, who were to have augmented the Safeway team. Sir Ken Morrison should beware of hubris.