Tax bill threatens Hollinger resistance to Barclays

Hollinger International, owner of the Daily and Sunday Telegraph, faces a potential tax bill of £350m if it sells its newspaper assets piecemeal rather than striking a deal with the Barclay brothers.

The tax liability could increase the chances of the billionaire owners of The Scots- man getting their hands on the Telegraph titles.

The board of Hollinger International has decided to press on with a speedy auction of the Telegraph Group, the Chicago Sun-Times, The Jerusalem Post and some Canadian papers. This is, in part, an attempt to thwart the deal struck by Hollinger International's former chairman, Lord Black of Crossharbour, to sell control to the Barclays.

Lord Black is selling his controlling stake in Hollinger Inc, a Canadian company that owns 30 per cent of Hollinger International's shares but 72 per cent of its voting rights.

The Hollinger International board, which is suing Lord Black and other former directors for the return of over $200m (£110m) in fees, is going to court later this months to try and thwart the deal.

Isaac Grossman, a leading New York tax lawyer, warned that as a US corporation, Hollinger International faces having to pay corporation tax at 35 per cent on the profits from the sale of any of its titles. "In the case of a UK asset, they may have to pay tax in the UK, and when they get back to the US this could also trigger a tax liability."

The Telegraph Group is be- lieved to be worth up to £1bn. Hollinger International paid just £30m for its initial 51 per cent stake in the company, then floated it in London. Lord Black took the company off the market in 1996, paying £273m for a 41 per cent stake.

Though that deal valued it at over £750m, the US tax authorities may look at how much Hollinger International paid for the group, which is less than £400m. A potential £600m profit could create a tax bill of over £200m.

The Sun-Times was bought for $180m and could be worth up to $800m, creating a $600m profit and a tax bill of $220m.