<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
January 22, 1999
----------------
(Date of Earliest event reported)
Hollinger International Inc.
----------------------------
(Exact name of registrant
as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation)
0-24004
--------
(Commission File Number)
95-3518892
----------
(I.R.S. Employer
Identification Number
401 North Wabash Avenue, Chicago, Illinois 60611
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(312) 321-2299
----------------------------------------------------
(Registrants' telephone number, including area code)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On January 22, 1999, Hollinger International Inc.
("International") purchased an aggregate of 19,845,118 common shares of Southam
Inc. ("Southam") pursuant to its offer to purchase all of the 29.0% of the
common shares of Southam that it did not already own. As a result of this
acquisition, International owns approximately 97% of the outstanding common
shares of Southam. Pursuant to applicable Canadian law, International will
purchase the remaining common shares in a compulsory acquisition as soon as is
practicable (these acquisitions of Southam common shares are referred to as the
"Acquisition"). The Acquisition was funded in part by the portion (71.0%)
received by a subsidiary of Publishing of Southam's recent Cdn.$7.00 per common
share special dividend, with the remaining portion funded (or to be funded) with
bank borrowings. The Acquisition, the Southam special dividend and the related
bank borrowings are together referred to as the "Southam Transaction". The cost
of the Acquisition is expected to be Cdn.$556.5 million ($364.6 million) and the
amount of the Southam special dividend was Cdn.$532.0 million ($348.6 million)
(71.0% of such dividend was paid to a subsidiary of Publishing). As a result,
the net increase in indebtedness associated with the Southam Transaction was
Cdn.$710.8 million ($465.7 million).
Item 5. Other Events
Consent Solicitation
--------------------
On January 28, 1999, Hollinger International Publishing Inc.
("Publishing"), a wholly owned subsidiary of International, commenced the
solicitation of consents to certain proposed amendments to the indentures which
govern its three issues of outstanding public debt aggregating $800 million
principal amount: the 8-5/8% Senior Notes due 2005, 9-1/4% Senior Subordinated
Notes due 2006, and 9-1/4% Senior Subordinated Notes due 2007. The consent
solicitation is subject to the terms and conditions set forth in Publishing's
Consent Solicitation Statement dated January 28, 1999. For each series of notes,
adoption of the proposed amendments requires consent of a majority of the
noteholders of that series.
In light of the improved financial performance of
International and its affiliates since the offering of the notes, the primary
purpose of the Consent Solicitation is to increase Publishing's flexibility to
make investments and
<PAGE> 3
potential distributions to International. As consideration to holders of
notes, Publishing proposes to further limit its ability to incur indebtedness
and, if the proposed amendments to the indenture governing a particular series
of notes are effected by execution of a supplemental indenture, to make a
consent payment of $12.50 per $1,000 principal amount of notes of that series
for which a valid consent is received (and not revoked).
Publishing has fixed 5:00 p.m., New York City time, on January
27, 1999 as the record date for determining holders entitled to deliver
consents. The consent solicitation will expire at 5:00 p.m., New York City time,
on February 10, 1999, unless extended.
Publishing reserves the right to, among other things, extend
or terminate the consent solicitation.
Community Newspaper Group Transaction
-------------------------------------
On February 1, 1999, International sold 45 of its U.S.
newspaper properties to Community Newspaper Holdings, Inc. ("CNHI") for an
aggregate of approximately $472 million, which amount includes the value of a
daily newspaper in Effingham, Illinois aquired by Hollinger from CNHI. The
properties are part of Hollinger's Community Newspaper Division (American
Publishing Co.) and are spread across the U.S. in small market clusters and
include 28 daily newspapers. The properties are located in 14 states with the
largest clusters in Texas, Oklahoma and Alabama.
----------------
Pro forma financial consolidated information for
International reflecting the Southam transaction and the community newspaper
group transaction as of September 30, 1998 and for the nine months then ended
is attached as an exhibit hereto.
Item 7. Financial Statements and Exhibits
(c) Exhibits
7.1 Unaudited Pro Forma Consolidated Financial Information
of Hollinger International Inc.
99.1 Hollinger International Inc. Press Release dated
January 28, 1999
99.2 Hollinger International Inc. Press Release dated
February 1, 1999
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: February 1, 1999
HOLLINGER INTERNATIONAL INC.
by /s/ Mark S. Kipnis
------------------------------
Name: Mark S. Kipnis
Title: Vice President - Law
and Secretary
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Exhibit Sequentially
Number Numbered
Page
------------
<S> <C> <C>
7.1 Unaudited Pro Forma Consolidated Financial Information of
Hollinger International Inc. 6
99.1 Hollinger International Inc. Press Release dated January 28,
1999 10
99.2 Hollinger International Inc. Press Release dated February 1,
1999 11
</TABLE>
<PAGE> 1
EXHIBIT 7.1
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following sets forth unaudited pro forma financial information for
Hollinger International Inc. and its subsidiaries (collectively, the "Company")
as of and for the period noted. The pro forma condensed consolidated balance
sheet as of September 30, 1998 and the pro forma condensed consolidated
statement of operations for the nine months ended September 30, 1998 reflect (i)
the Southam Transaction, which consists of the acquisition of the 29.0% of the
common shares of Southam not already owned by the Company, the payment of a Cdn.
$7.00 special dividend by Southam and bank borrowings to finance the foregoing
and (ii) the Community Newspaper Group Transaction, which consists of the sale
of 45 newspapers and acquisition of one newspaper and the application of the
aggregate net cash proceeds received therefrom to repay outstanding debt under
the Bank Credit Facility. The above transactions have been reflected in the pro
forma condensed consolidated balance sheet as of September 30, 1998 set forth
below assuming that the transactions had been consummated as of that date and
the pro forma condensed consolidated statements of operations for the nine
months ended September 30, 1998 assuming that the transactions had been
consummated as of January 1, 1998.
<PAGE> 2
HOLLINGER INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(unaudited)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------- PRO FORMA
HOLLINGER COMMUNITY HOLLINGER
INTERNATIONAL INC. SOUTHAM NEWSPAPER GROUP INTERNATIONAL INC.
HISTORICAL TRANSACTION TRANSACTION TOTAL
------------------ -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents ................. $ 91,468 $ 247,487 (a) $456,000 (g) $ 196,912
.............................................. 117,161 (b) (349,000)(h)
.............................................. (364,648)(c) (1,556)(g)
Accounts receivable, net .................. 256,052 (11,342)(g) 245,085
.............................................. 375 (j)
Due from affiliates ....................... 34,576 34,576
Inventories ............................... 48,984 (1,900)(g) 47,144
.............................................. 60 (j)
Other current assets ...................... 64,586 (494)(g) 64,110
.............................................. 18 (i)
---------- ----------
Total current assets ................... 495,666 587,827
Investments in affiliates, at equity ......... 50,578 50,578
Property, plant, and equipment, net ......... 619,716 5,223 (c) (28,709)(g) 598,288
.............................................. 1,428 (j)
Intangible assets, net ....................... 1,849,817 243,717 (c) (184,803)(g) 1,923,764
.............................................. 15,033 (j)
Other assets ................................. 203,872 (515)(g) 203,357
---------- ----------
$3,219,649 $3,363,814
========== ==========
Current liabilities:
Current installments of long-term debt..... 6,294 (3,316)(g) 2,978
Accounts payable ......................... 99,572 (892)(g) 98,829
.............................................. 149 (j)
Accrued expenses .......................... 166,905 (2,896)(g) 164,226
.............................................. 217 (j)
Income taxes payable ...................... 90,718 (5,556)(g) 192,162
107,000 (g)
Deferred revenue .......................... 87,752 (5,018)(g) 82,734
---------- ----------
Total current liabilities .............. 451,241 540,929
Long-term debt, less current installments..... 1,442,350 348,578 (a) (349,000)(h) 1,559,089
.............................................. 117,161 (b)
Other long-term liabilities .................. 246,119 1,932 (c) (6,156)(g) 242,443
548 (j)
---------- ----------
Total liabilities ............................ 2,139,710 2,342,461
Minority interest ............................ 218,731 (101,091)(a) --
.............................................. (117,640)(c)
Redeemable preferred stock ................... 33,325 33,325
Stockholders' equity ......................... 827,883 160,145 (g) 988,028
---------- ----------
$3,219,649 $3,363,814
========== ==========
Total Debt to Annualized EBITDA .............. 3.71x(k) 4.35x (k)
</TABLE>
<PAGE> 3
HOLLINGER INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(unaudited)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------- PRO FORMA
HOLLINGER COMMUNITY HOLLINGER
INTERNATIONAL INC. SOUTHAM NEWSPAPER GROUP INTERNATIONAL INC.
HISTORICAL TRANSACTION TRANSACTION TOTAL
------------------ -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Operating revenues ............................. $1,619,443 $ (79,222)(g) $1,543,565
3,344 (j)
Operating costs and expenses ................... 1,326,493 (54,286)(g) 1,274,555
2,348 (j)
Depreciation and amortization .................. 86,194 $4,570 (d) (7,684)(g) 83,187
107 (j)
---------- ----------
Total operating costs and expenses........ 1,412,687 1,357,742
Operating income ............................... 206,756 185,823
Other income (expense):
Interest expense ............................ (78,384) 22,967 (e) (17,208)(i) (84,102)
(41)(g)
Amortization of debt issue costs ............ (4,599) (4,599)
Equity in earnings (loss) of affiliates...... (949) (949)
Interest and dividend income ................ 6,249 6,249
Other income, net ........................... 324,880 (125)(g) 324,755
---------- ----------
Total other income (expense).................... 247,197 241,354
---------- ----------
Earnings before income taxes,
minority interest and extraordinary items.... 453,953 427,177
Income taxes ................................... 193,985 (9,187)(f) (7,229)(g) 184,808
6,883 (f)
(356)(j)
---------- ----------
Earnings before minority intests and
extraordinary items ......................... 259,968 242,369
Minority interest .............................. 78,189 (78,189)(c)
---------- ----------
Earnings before extraordinary items ............ 181,779 242,369
Extraordinary items ............................ (5,067) (5,067)
---------- ----------
Net earnings ................................... $ 176,712 $ 237,302
========== ==========
</TABLE>
<PAGE> 4
- ---------
(a) Represents payment by Southam of a special dividend of Cdn. $7.00 per
share and the incurrence by Southam of Cdn. $532,018,000 ($348,578,000) of
additional long-term debt to finance such payment (which debt was
subsequently refinanced by a borrowing by HCPH under the Bank Credit
Facility). Of such amount, 71.0% ($247,487,000) was received by HCPH and
used to finance a portion of the purchase price of the Southam common
shares acquired in the Acquisition. See notes (b) an(c). The remaining
$101,091,000 of the dividend reduces minority interest.
(b) Represents the borrowing by HCPH of the additional Cdn. $178,817,000
($117,161,000) required to purchase the remaining 29.0% of Southam for
Cdn. $556,545,000 ($364,648,000).
(c) Represent the acquisition of the remaining 29.0% interest in Southam as
follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Purchase price $364,648
Balance of minority interest 117,640
--------
Balance to be allocated $247,008
========
Allocated as follows:
Property, plant and equipment $ 5,223
Intangible assets 243,717
Other long-term liabilities (1,932)
--------
$247,008
========
</TABLE>
(d) Represents the additional amortization of $243,717,000 of intangibles
resulting from the acquisition of the 29.0% interest in Southam over 40
years.
(e) Represents increase in interest expense on long term debt of $465,739,000
($348,578,000 plus $117,161,000) as a result of the additional debt
incurred to pay the Southam special dividend and to acquire the remaining
29.0% interest in Southam at 6.57% (the approximate rate on the Bank
Credit Facility).
(f) Represents tax effect of pro forma interest adjustment at 40%.
(g) Represents the elimination of the assets, liabilities, revenues and
expenses of the 45 community newspapers disposed of as part of the
Community Newspaper Group Transaction, the receipt of the cash proceeds of
$456,000,000 and the gain on the sale of such newspapers of $160,145,000,
net of income taxes payable of $107,000,000. As part of the Community
Newspaper Group Transaction, International will also receive the assets
and liabilities of one daily newspaper valued at approximately
$16,000,000. See note (j) below.
(h) Represents the use of net cash proceeds of $349,000,000 ($456,000,000 less
income taxes payable of $107,000,000) from the disposition of the
community newspapers to pay down a portion of the Bank Credit Facility.
(i) Represents the reduction of interest expense on $349,000,000 of long-term
debt at 6.57% as a result of the application of the net proceeds from the
sale of the community newspapers to repay a portion of the Bank Credit
Facility.
(j) Represents the assets, liabilities, revenues and expenses resulting from
the acquisition in a like-kind exchange of a daily newspaper as part of
the Community Newspaper Group Transaction.
(k) Represents the ratio of (i) historical and pro forma Total Debt at
September 30, 1998 to (ii) historical and pro forma 1998 Annualized
EBITDA, respectively, Annualized EBITDA has been calculated based on
actual and pro forma EBITDA for the nine months ended September 30,
1998. The calculation of these ratios differs in certain respects from
the calculation of the Consolidated Cash Flow Ratio pursuant to the
Indentures.
<PAGE> 1
EXHIBIT 99.1
HOLLINGER INTERNATIONAL INC.
FOR IMMEDIATE RELEASE
Contact:
Paul B. Healy, Vice President Jack A. Boultbee, Executive Vice President
Corporate Development and and Chief Financial Officer
Investor Relations Hollinger International Inc.
Hollinger International Inc. (800) 288-1141
(212) 586-5666 (416) 363-8721
HOLLINGER INTERNATIONAL PUBLISHING INC.
SOLICITS CONSENTS TO AMEND INDENTURES
RELATING TO OUTSTANDING DEBT
CHICAGO, JAN. 28, 1999. Hollinger International Publishing Inc. (Publishing), a
wholly owned subsidiary of Hollinger International Inc. (International), today
commenced the solicitation of consents to certain proposed amendments to the
indentures which cover its three issues of outstanding public debt aggregating
$800 million principal amount: the 8 5/8% Senior Notes due 2005, 9 1/4% Senior
Subordinated Notes due 2006, and 9 1/4% Senior Subordinated Notes due 2007. The
consent solicitation is subject to the terms and conditions set forth in
Publishing's Consent Solicitation Statement dated January 28, 1999. For each
series of notes, adoption of the proposed amendments requires consent of a
majority of the noteholders of that series.
In light of the improved financial performance of International and its
affiliates since the offering of the notes, the primary purpose of the Consent
Solicitation is to increase Publishing's flexibility to make investments and
potential distributions. Among the potential partial uses of this increased
flexibility, in light of a recent share price that does not reflect current
operating results, International could pursue an accelerated program to purchase
Class A shares of International for cancelation. As consideration to holders of
notes, Publishing proposes to further limit its ability to incur indebtedness
and, if the proposed amendments to the indenture governing a particular series
of notes are effected by execution of a supplemental indenture, to make a
consent payment of $12.50 per $1,000 principal amount of notes of that series
for which a valid consent is received (and not revoked).
Publishing has fixed 5:00 p.m., New York City time, on January 27, 1999 as the
record date for determining holders entitled to deliver consents. The consent
solicitation will expire at 5:00 p.m., New York City time, on February 10, 1999,
unless extended.
Publishing reserves the right to extend or terminate the consent solicitation.
TD Securities (212-827-7669) and Merrill Lynch & Co. (212-449-4914) are acting
as solicitation agents for the solicitation. Beacon Hill Partners, Inc.
(1-800-755-5001 toll-free) is the information agent for the solicitation. State
Street Bank and Trust Company (617-664-5587) is acting as the depositary for the
solicitation.
Hollinger International, Inc., through subsidiaries and affiliated companies, is
a leading publisher of English-language newspapers in the United States, the
United Kingdom, Canada and Israel. Included among its paid daily newspapers are
the Chicago Sun-Times, The Daily Telegraph, the National Post (Canada) and The
Jerusalem Post.
For more information on Hollinger International Inc., please visit our website
at www.hollinger.com.
<PAGE> 1
Exhibit 99.2
HOLLINGER INTERNATIONAL INC.
FOR IMMEDIATE RELEASE
Contact:
Todd A. Vogt Paul B. Healy
Executive Vice President Vice President, Corporate Development
Community Newspaper Division and Investor Relations
Hollinger International Inc. Hollinger International Inc.
(312) 321-3048 (212) 586-5666
Michael Reed
Executive Vice President & CFO
Community Newspaper Holdings, Inc.
(205) 298-7100
HOLLINGER INTERNATIONAL CONCLUDES THE SALE
OF 45 COMMUNITY NEWSPAPERS TO CNHI
CHICAGO, FEBRUARY 1, 1999 - Hollinger International Inc. (NYSE: HLR) and
Community Newspaper Holdings, Inc. (CNHI) of Birmingham, Alabama announced
today that the sale by Hollinger International of 45 of its U.S. newspaper
properties, as previously announced on December 4, 1998, has been completed for
an aggregate consideration of approximately $472 million, which amount includes
the value of a daily newspaper in Effingham, Illinois acquired by Hollinger
from CNHI.
The properties are part of Hollinger's Community Newspaper Division
(American Publishing Co.) and are spread across the U.S. in small market
clusters and include 28 daily newspapers. The properties are located in 14
states with the largest clusters in Texas, Oklahoma and Alabama.
CNHI is headquartered in Birmingham, Alabama. It owns and operates more
than 225 daily and weekly publications in 24 states.
Hollinger International Inc., through subsidiaries and affiliated
companies, is a leading publisher of English language newspapers in the United
States, the United Kingdom, Canada and Israel. Included among its paid daily
newspapers are the Chicago Sun-Times, The Daily Telegraph, The Jerusalem Post
and the National Post (Canada).
