ARGUS CORPORATION LIMITED

January 07, 2005 19:38 ET

Argus Corporation Limited: Status Update Report


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: ARGUS CORPORATION LIMITED

TSX SYMBOL: AR.PR.A
TSX SYMBOL: AR.PR.D
TSX SYMBOL: AR.PR.B

JANUARY 7, 2005 - 19:38 ET

Argus Corporation Limited: Status Update Report

TORONTO, ONTARIO--(CCNMatthews - Jan. 7, 2005) - Argus Corporation
Limited ("Argus") (TSX:AR.PR.A)(TSX:AR.PR.D)(TSX:AR.PR.B) today provided
a status update of developments since its last Status Update Report was
filed on December 24, 2004.

Argus is providing updates on its affairs on at least a bi-weekly basis
(each a "Report"). These Reports are being made in accordance with
certain guidelines of the Ontario Securities Commission (the "OSC")
until Argus is able to meet its public filing obligations.

These guidelines are pursuant to the Management and Insider Cease Trade
Order that was issued by the OSC on June 3, 2004 with respect to the
management and insiders of Argus.

Argus' Status Update Reports that have been filed since the Order are
available to review at www.sedar.com.

The Report further provides certain financial information and an update
as to the preparation and filing of financial statements and other
related matters by Argus.

Argus owns or controls 61.8% of the Retractable Common Shares ("Common
Shares") of Hollinger Inc. ("Hollinger"). Hollinger in turn owns 68% of
the voting shares and 18.2% of the equity of Hollinger International
Inc. ("International").

As the shares Argus owns of Hollinger are the primary asset held by
Argus and the shares of International in turn are the primary asset held
by Hollinger, this Report includes certain updates regarding each of
Hollinger and International.

Hollinger and International have both also been subject to Management
and Insider Cease Trade Orders for their failure to file financial
statements and related reports when required. Those orders were issued
on June 1, 2004.

Current Status of Financial Reporting of International and Hollinger

International has not filed its audited financial statements for 2003 or
its financial statements for the first three Quarters in 2004 and
related Management's Discussion and Analysis ("MD&A") reports.

As a result, Hollinger has been unable to prepare and file its audited
financial statements for 2003 and its related MD&A as generally accepted
accounting principles ("GAAP") require consolidation with those of
International. Hollinger is therefore also unable to prepare its
statements for the first three Quarters of 2004 and the related MD&As.

Current Status of Financial Reporting of Argus

Argus filed its 2003 audited financial statements on a market valuation
basis as it had historically which was then in compliance with GAAP.

However, Argus is now required to consolidate its financial statements
with those of Hollinger for fiscal periods beginning after January 1,
2004 due to a change in GAAP.

As a result of the change in accounting policy, Argus has been unable to
prepare financial statements in compliance with GAAP for each of the
first three Quarters of 2004. Argus has instead provided its Reports
pursuant to the Order.

In order to inform the marketplace of key economic developments, Argus
has additionally prepared and released financial statements for the
first three Quarters of 2004. These statements have been presented as
alternative financial information and were appended to its Reports dated
August 19 and November 12, 2004.

These statements may be reviewed online at www.sedar.com.

Future Financial Reporting

In order for each of International, Hollinger and Argus to normalize its
financial reporting and to have its respective Management and Cease
Trade Order lifted, they each need to prepare and file their financial
statements as required by GAAP and related MD&As. International's 2003
audited financial statements need to be filed first.

International's Financial Reporting

International had earlier announced that it would be filing its audited
financial statements (and related MD&A) for its fiscal year ended
December 31, 2003 by the end of December, 2004.

International announced that appropriate filings with respect to these
financial statements would be made on Forms 10-K, 10-Q and 8-K with the
U.S. Securities and Exchange Commission (the "SEC") and in Canada.

On December 24, 2004, International amended its reporting timetable. It
announced that it required additional time to review the report of the
Special Committee of the Board of Directors of International that had
been filed with the U.S. District Court in Illinois on August 30, 2004
and to assess its impact, if any, on the results of operations of
International.

International then announced on December 29, 2004 that its outside
auditor is conducting its final review of its 2003 Annual Report on Form
10-K and that it expects to file the report with the U.S. Securities and
Exchange Commission no later than mid-January, 2005.

International further announced on December 29, 2004 that it expects to
become current on its quarterly reports for 2004 within approximately
two months of the filing of its 2003 Annual Report.

Hollinger's Financial Reporting

On December 31, 2004, Hollinger announced that the filing by
International of its 2003 Annual Report and its 2004 quarterly reports
is a necessary but not sufficient condition to permit Hollinger to
complete and file its financial statements for the same periods.

Hollinger further noted on December 31, 2004 that the completion and
audit of its financial statements will require a level of co-operation
from International and its auditors which is still in negotiation. It
stated that its Audit Committee will consider what, if any, additional
financial information and/or alternative financial statements Hollinger
will be in a position to publicly disclose and/or complete following the
filing of International's financial statements.

The completion and audit of Hollinger's 2003 financial statements will
require a level of cooperation from International and its auditors.
Hollinger advised on December 31, 2004 that it and International
continue to pursue, on a without prejudice basis, the conclusion of
mutually-acceptable arrangements to permit the audit of Hollinger's 2003
annual financial statements to begin as soon as possible.

Argus' Financial Reporting

Argus will be unable to prepare financial statements consolidated with
those of Hollinger and bring its financial reporting up to date until
Hollinger has prepared its financial statements. Argus is however unable
to determine when it may complete its financial statements consolidated
with those of Hollinger.

Argus' intention is to prepare consolidated financial statements with
those of Hollinger as soon as practicable after Hollinger files its
statements.

Argus presently contemplates, however, that it will need to continue to
file additional financial statements that are not consolidated with
those of Hollinger for current and upcoming financial periods on an
alternative financial basis.

Financial Position of Argus

Argus had Cdn. $263,950 of cash as of the close of business on January
7, 2005.

Argus indirectly owns 21,596,387 Retractable Common Shares of Hollinger
(each a "Share") with a market value at the close of trading on January
7, 2005 on the Toronto Stock Exchange of Cdn. $6.60 per share or an
aggregate of Cdn. $142,536,154.

The market value of its shareholdings is subject to the minority
interest of The Ravelston Corporation Limited ("Ravelston"), the parent
of Argus. 11,862,342 of the Shares, being approximately fifty-five
percent of the Shares, are owned by a subsidiary of Argus in which
Ravelston has a significant minority interest.

The amount of that minority interest was stated to be $20,585,670 in the
financial statements that Argus publicly filed as alternative financial
information as at September 30, 2004.

Argus has further set out a liability for an amount on account of future
income taxes on unrealized net capital gains. The amount of that
liability was stated to be $14,793,176 in Argus' alternative financial
information as at September 30, 2004.

Dividends

Argus will require additional funds to be able to continue to pay
dividends on its Class A and Class B Preference Shares on an
uninterrupted basis, including an additional amount of approximately
$251,703 for dividends that are scheduled to be paid on February 1, 2005.

Argus intends to make efforts to ensure that such dividend payments can
be made on February 1, 2005 and continue to be made thereafter on an
uninterrupted basis.

Proposed Privatization of Hollinger

Ravelston proposed a going private transaction involving Hollinger on
October 28, 2004.

The proposed going private transaction is to be structured as a share
consolidation and retirement of Hollinger's shares held by parties other
than by Argus and Ravelston directly and indirectly.

On November 16, 2004, Ravelston announced that it will support the
proposed privatization on the basis that holders of Shares (other than
Ravelston and certain of its affiliated entities including Argus) would
receive Cdn. $7.25 in cash for each Share held by them and holders of
Series II Preference Shares of Hollinger (each a "Series II Share")
would receive 0.46 of a share of Class A Common Stock of International
for each Series II Share held by them.

No further terms have yet been announced.

The Hollinger going private transaction would result in Argus holding a
greater percentage of the Shares of Hollinger. Hollinger would then be a
private company without the public company liquidity that currently
exists.

Argus will review and consider whether the terms of the proposal are
acceptable when they are announced. Argus' Independent Committee
comprised of Jonathan H. Marler and Robert E. Tyrrell will retain such
independent professional advisers as it deems necessary and make
recommendations to the Board of Directors of Argus.

Hollinger has established a Privatization Committee to review the
proposed transaction. That committee has retained independent financial
and legal advisors to assist it.

Hollinger's Financial Position

Hollinger announced on December 30, 2004 that it and its subsidiaries
(excluding International and its subsidiaries) had approximately US
$9.44 million of cash or cash equivalents at the close of business on
December 24, 2004.

Hollinger reported on December 30, 2004 that it has approximately US
$10.5 million of cash deposited as collateral for its borrowings and
that it is entitled to apply this amount towards future interest
payments on certain secured borrowings.

In addition, Hollinger is to receive dividends from International in the
aggregate amount of approximately US $40,218,953.65 that are to be paid
by International on January 18, 2005. Further details about these
dividends are provided later in this Report.

Hollinger commenced honouring retractions of its Series II Shares on
October 28, 2004. Such retractions are effected by Hollinger delivering
.46 of a share of Class A Common Stock of International to the holder of
the Series II Shares being retracted in exchange for each retracted
Series II Share.

In the period since October 28, 2004 until December 30, 2004, Hollinger
has delivered 9,637 shares of Class A Common Stock of International
pursuant to the retractions of its Series II Shares.

Retractions of Hollinger's outstanding Shares submitted after May 31,
2004 continue to be suspended until further notice.

Hollinger announced on December 30, 2004 that it directly or indirectly
owned 782,923 shares of Class A Common Stock and 14,990,000 shares of
Class B Common Stock of International.

Based on the closing price of the Class A Common Stock of International
on the New York Stock Exchange (the "NYSE") at the close of business on
January 7, 2005 of US $15.07 and the number of shares of Class A Common
Stock and Class B Common Stock of International owned by Hollinger at
December 30, 2004, the market value of Hollinger's direct and indirect
holdings in International is US $237,697,950.

All of Hollinger's interest in the shares of Class A Common Stock of
International is being held in escrow with a licensed trust company in
support of future retractions of its Series II Shares.

All of Hollinger's interest in the shares of Class B Common Stock of
International is pledged as security in connection with US $78 million
of Senior Secured Notes and US $15 million of Second Priority Notes
issued by it.

On December 30, 2004, Hollinger announced that, on the basis of the
closing price of the Class A Common Stock of International on the NYSE
on December 29, 2004 of US $18.31 per share and its cash position at
December 24, 2004, it then had in excess of US $284.9 million aggregate
collateral securing the US $78 million principal amount of the Senior
Secured Notes and the US $15 million principal amount of the Second
Priority Notes that were outstanding.

It should be noted, however, that the trading price of the Class A
Common Stock of International at the close of business on January 7,
2005 was US $3.24 less per share than it was on December 29, 2004. This,
in part, reflects the dividends, including the US $2.50 Special
Dividend, that International is to pay on its Class A and Class B Common
Stock on January 18, 2005 to holders of record as at January 3, 2005 as
described below.

Hollinger to Receive Dividends

Shareholders of International as at January 3, 2005, including
Hollinger, are to receive two dividends that are to be paid on January
18, 2005 to the holders of its Class A and Class B Common Stock.

The dividends to be received by Hollinger include a regular quarterly
dividend of US $0.05 per Class A and Class B share of International
estimated to be an aggregate of US $786,646.15 and a special dividend of
US $2.50 per Class A and Class B share (the "Special Dividend")
estimated to be an aggregate of US $39,432,307.50.

The Special Dividend that is to be paid to all holders of
International's Class A and Class B shares is intended to distribute
approximately US $227 million of the net proceeds from the sale of
International's Telegraph properties after the repayment of certain debt
and taxes (the "Proceeds").

International announced on December 16, 2004 that it would be returning
a total of approximately US $500 million of the Proceeds to its
shareholders as part of the Strategic Process that it announced in
November, 2003.

International further stated on December 16, 2004 that the balance of
approximately US $273 million after the Special Dividend will likely be
distributed through a buy-back of its Class A Common Stock.

International announced that it might also consider another special
dividend instead of the share buy-back. It further stated, however, that
there is no assurance that the second distribution will be made and, if
made, whether it will be a special dividend or tender offer and what
would be the terms of any such tender offer.

The final decision on whether such a tender offer will be made is to be
deferred until after International files its 2003 annual audited
statements, the first three quarterly reports for 2004 and a pro forma
financial statement following the sale of the Telegraph properties.

International has further stated that it will continue to hold following
these distributions "sufficient cash to fund our operations and
obligations and to avail ourselves of strategic opportunities".

Expiration of Delaware Injunction

International and Hollinger had earlier agreed that the injunction
granted by Vice-Chancellor Leo E. Strine in Delaware on February 26,
2004 limiting Hollinger's control of International is to be extended
beyond its original October 31, 2004 expiration date.

The injunction is to now expire on the earlier of the date the Proceeds
have been distributed to International's shareholders and January 31,
2005. The injunction is accordingly expected to expire on January 31,
2005.

Further Agreement Between Hollinger and International

International has further agreed not to block any payment to Hollinger
required by a court order (which it will not seek), statute or
regulation. There is to be no reduction or set-off.

Any payment to be received by Hollinger is to be proportionate to its
shareholdings of International or, in the case of a self tender, to the
number of shares tendered.

Hollinger Inspection

Counsel for Ernst & Young Inc. as the court-appointed inspector of
Hollinger ("the Inspector") and various parties, including individuals
that the Inspector wishes to examine, appeared before Justice Colin L.
Campbell of the Superior Court of Justice of Ontario (the "Court") on
January 6, 2005.

The next Hearing before Justice Campbell is to be held on January 11,
2005 at which time the Inspector is to provide an updated report to the
Court.

The Inspector continues to inspect Hollinger's related party
transactions pursuant to an order of Justice Campbell made pursuant to
s. 229(1) of the Canada Business Corporations Act. It has now provided
four interim Reports to the Court with respect to its inspection of
Hollinger's related party transactions.

Orders were made at the Hearing on December 6, 2005 permitting the
Inspector to examine two former Directors of Hollinger, Peter Y.
Atkinson and Maureen Sabia.

The Inspector wishes to examine other former Directors of Hollinger
including Lord Black, Barbara Amiel-Black, F. David Radler and J.A.
Boultbee who are current Directors of Argus.

Counsel for Lord Black and Messrs. Radler and Boultbee each submitted at
the Hearing on January 6, 2005 that it is premature for the Inspector to
take the position that it is essential for their examinations to be
conducted in order to write its report.

A Notice of Constitutional Issue was served by counsel for Lord Black on
December 22, 2004 on the Attorney General of each of Canada and Ontario
on the basis that certain of the examinations proposed by the Inspector
breach certain provisions of the Canadian Charter of Rights and Freedoms.

Other Hollinger Developments

For additional information on developments respecting Hollinger,
including a more-detailed review of the terms of the proposed share
consolidation and privatization, reference can be made to its public
filings online at www.hollingerinc.com, www.hollinger.com or
www.sedar.com.

International's Litigation Developments

On January 5, 2004, Judge Blanche Manning of Illinois provided in an
Order that she would rule expeditiously respecting various Motions of
the defendants to dismiss the Second Amended Complaint of International.
It is anticipated that she will making that ruling in writing.

A Status Hearing that had been scheduled to be heard on January 7, 2005
is now to be held on February 25, 2005.

International filed its Second Amended Complaint in Illinois on October
29, 2004 as against Hollinger, Ravelston and RMI, certain of their
current and former directors and officers and others.

The total amount sought by International pursuant to the Second Amended
Complaint is approximately US $542 million including US $117 million of
pre-judgment interest at the time of filing together with costs.

International has further appealed the dismissal of its previous
Complaint that included allegations pursuant to the Racketeer and
Corrupt Influenced Organizations Act. This matter is also to be decided
by Judge Manning.

Other International Developments

International announced on December 31, 2004 that the NYSE had granted a
three-month further extension to International for it to file its 2003
Annual Report on Form 10-K with the SEC and that its shares would
continue to be listed during this period.

This extension is subject to a further review by the NYSE on an ongoing
basis. International further announced that the NYSE will initiate
suspension procedures if its 2003 Annual Report is not prepared by March
31, 2005.

For additional information on developments respecting International,
reference can be made to its online public filings at either
www.hollingerinternational.com or http://www.sec.gov/edgar.shtml.

There has been no other material change from the information contained
in the Status Update Report of Argus issued on December 24, 2004.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Argus Corporation Limited
    Monique L. Delorme
    Chief Financial Officer
    (416) 363-8721
    or
    Argus Corporation Limited
    Peter G. White
    Executive Vice-President and Secretary
    (416) 363-8721