Barclay brothers lead Telegraph Group bid

By DAMIAN REECE

LONDON - The Barclay twins are close to winning the seven-month takeover saga for the Telegraph Group as they enter final contract negotiations with owner Hollinger International.

Only David Montgomery, the former Daily Mirror chief executive, and his private equity consortium of 3i and Veronis Suhler Stevenson, stand in the way of Sir David and Sir Frederick Barclay capturing the Telegraph titles for a price tag thought to be between £670 million ($1.9 billion) and £690 million.

CVC Capital Partners, another private equity bidder, had been leading a consortium including the Daily Mail group of newspapers but has now dropped out of the bidding.

The final contract negotiations, thought to include agreements on working capital and aspects of taxation, will be followed by another round of bidding when Lazard, Hollinger's financial advisers, are expected to try to wring a final increased offer from both bidders.

Gordon Paris, the interim chief executive of Hollinger, was in London this week to assess the rival bids.

He has since checked out of his hotel, adding to speculation that a decision on the ownership of the Daily Telegraph, the Sunday Telegraph and the Spectator magazine was close. Both rival bidders expect a decision by tonight with an announcement next week.

Paris must return to New York for a Hollinger board meeting this weekend to gain final approval for the preferred bidder.

The Barclay brothers, owners of the Ritz Hotel in London and the Littlewoods retail business, already own the Scotsman and a local Edinburgh newspaper through Press Holdings, their newspaper business.

Their freedom from some of the financial and investment constraints surrounding the 3i consortium are expected to give them the edge when it comes to final bidding.

Montgomery's bid will offer senior management at the Telegraph Group equity in the business, something that the Barclays are thought unlikely to do. However, the offer will not sway the Hollinger board in deciding on the eventual winner.

Many in the Telegraph Group have been worried about the scale of cost savings that 3i's bid may involve with cuts of more than £10 million to £20 million widely expected. However, these estimates are thought to be wide of the mark with Montgomery likely to suggest savings of just a few million pounds.

- INDEPENDENT