Broker joins queue to buy Telegraph

Terry Smith, the maverick chief executive of stockbroker Collins Stewart, is putting together a cash bid for the Telegraph titles that would value the business at between £400m and £500m and see its shares trade on the London Stock Exchange.

He has contacted Lazards, the investment bank conducting a strategic review of the newspaper's troubled parent company, Hollinger International. It is understood Mr Smith has also sent a letter to Hollinger executives expressing his interest.

Mr Smith is talking to institutional investors who are interested in backing a bid. The structure would be similar to the Center Parcs and Northumbrian Water deals he organised this year.

His brokerage finds institutional investors to fund the purchase of companies, then quickly floats the acquisitions on the Alternative Investment Market, which has fewer rules and regulations than the main exchange. Northumbrian has moved to a full listing.

A cash bid from financial buyers might be more attractive than approaches from the Daily Express proprietor, Richard Desmond, or the Daily Mail & General Trust, both of which would face lengthy inquiries by competition regulators.

Other interested financial buyers are thought to include private equity firms Candover and Apax. Companies already in the media industry might be willing to pay more, however, for the Tory establishment newspapers.

It is understood that Mr Smith has already earmarked a senior management team to run the Telegraph group if his bid is successful.

Lazards was appointed to conduct a review of Hollinger's assets this year following revelations that directors had been paid about £20m without the consent of the board, an action that caused the company to overstate its earnings figures.

Investors have also protested about the payment of $300m (£170m) in management fees to companies controlled by Lord Black, the man who built the Hollinger newspaper empire, which includes the Chicago Sun-Times and Jerusalem Post as well as the Daily and Sunday Telegraph.

It is widely expected that the group's assets will be put up for auction next year. Lord Black is battling to keep his empire intact but, with an internal investigation into the payments and an inquiry by US regulator the securities and exchange commission, a break-up of the group might be unavoidable.

Lord Black was forced to resign as group chief executive in November.

Mr Smith has been embroiled in a dispute with his company's former analyst, James Middleweek, who alleged that the broker has engaged in stock market abuse. The Financial Services Authority is looking into the claims.

The company denies the allegations and has counter-claimed that Mr Middleweek attempted to blackmail it, though a City of London police investigation found that no offence had been committed.

Mr Smith made his name in the early 1990s by writing the book Accounting for Growth, which exposed dubious accounting practices of public companies and cost him his job as a financial analyst.