“Ramping up the power struggle at publisher Hollinger International Inc. and throwing into question ownership of two of the world’s biggest newspapers, press baron Conrad Black agreed to sell his controlling stake in the publisher’s parent company to Britain’s Press Holdings International Ltd. for 423.8 million Canadian dollars ($326.3 million),” writes Elena Cherney in today’s Wall Street Journal.

“In a complex structure, Lord Black’s wholly owned Toronto holding company, Ravelston Corp., controls 78% of Hollinger Inc., also based in Toronto.”

“Hollinger Inc., in turn, through supervoting shares controls Hollinger International, of Chicago. Press Holdings said it agreed to buy Ravelston’s controlling stake in Hollinger Inc. and to make a tender offer for Hollinger Inc.’s publicly traded shares.”

“But the deal, which came after a weekend showdown between Lord Black and a special committee of Hollinger International’s board investigating financial irregularities at the company, faces big challenges. Lord Black stepped down in November as chief executive of Hollinger International, publisher of the Chicago Sun-Times and London’s Daily Telegraph, after the special committee uncovered $32.15 million in unauthorized payments to Lord Black, other executives and Hollinger Inc. Although Lord Black agreed to repay $7.2 million and said he would cooperate with a review of the company’s alternatives by investment bankers Lazard LLC, he later balked at the terms of the deal, challenging the finding that payments were unauthorized.”

“The stakes in the conflict rose late Friday when the committee filed a lawsuit seeking to recover $200 million, plus interest, in funds it alleges Lord Black and others looted from the company. Meanwhile, the Securities and Exchange Commission stepped in, obtaining a court order to block Lord Black from firing the board or disbanding the special committee. And on Saturday, the executive committee removed Lord Black as nonexecutive chairman of Hollinger International, effective immediately.”

“Press Holdings, a closely held company controlled by 68-year-old twin brothers Sir David and Sir Frederick Barclay and based in the Channel Islands between England and France, said completion of the deal is conditional on ‘accuracy of representations.’ The Barclay brothers negotiated the pact directly with Lord Black.”

“Lord Black’s latest maneuver tests the limits of the power of the special committee and its adviser, former SEC Chairman Richard C. Breeden. Minority shareholders, some of whom have criticized the special committee for moving slowly, lauded the committee for filing the lawsuit. But they said Mr. Breeden now would have to take further steps to ensure that Lord Black’s possible exit from ownership of the company will not complicate efforts to reclaim funds.”

“Hollinger International said its board members were reviewing Lord Black’s agreement with Press Holdings Sunday. The board may be able to block the transaction because it amounts to ‘a hostile takeover without board approval,’ a person familiar with the board said. Further, the terms of the court order appear to mean Press Holdings wouldn’t immediately be able to name anyone to the board.”