Postmedia, owner of the National Post and numerous daily broadsheet papers across Canada, has announced it's buying Quebecor's chain of 175 English-language newspapers for $316 million.
The buyout will create a newspaper giant in English Canada, with many cities now seeing all their major dailies fall into the hands of one company.
In Vancouver, where the Sun broadsheet and the Province were already both owned by Postmedia, the chain will add the free commuter daily 24 Hours to its roster. In Ottawa, both major dailies will now be owned by the same company, as will the major dailies in Calgary and Edmonton.
In all, Postmedia will buy 175 English-language newspapers from Quebecor, including the Sun tabloid chain. The deal includes the Canoe news portal, a printing plant in Toronto and 34 real estate properties. The $316 million price tag is but a fraction of the $1 billion Quebecor paid for the Sun Media newspapers in 1998.
Postmedia, which has been struggling with quarter after quarter of losses, says it will finance the deal through a combination of debt and raising more money from existing shareholders. In its most recent quarter, the company lost $20.6 million as print advertising revenues continue to decline. The company is more than $470 million in debt.
Postmedia is getting help from its largest shareholder, New York-based GoldenTree Asset Management, which will help finance the sale and will receive 33.5 per cent of the company’s voting shares.
Quebecor is also in the red, posting a $93.5 million loss in its most recent quarter.
Postmedia CEO Paul Godfrey said at a press conference Monday that the company plans to continue to operate the Sun Media papers alongside its own.
“Even with the challenges, newspapers are still the creators of the most reliable, detailed and accurate journalism this country relies on,” he said.
“We believe this industry is much stronger with the Sun and Postmedia brands together than apart.”
He acknowledged that newspapers have been losing audience and advertising revenue to “foreign-based” digital properties, including Facebook and Google. He stressed the “made-in-Canada” nature of the deal, saying it would give advertisers native Canadians alternatives to those rivals.
Godfrey said that he was initially approached by Quebecor media mogul Pierre Karl Peladeau two and half years ago to forge some sort of deal that would have looked more like a merger. When Peladeau decided to get into politics, the purchase of Quebecor papers by Postmedia seemed to be more realistic.
Both companies' boards of directors have approved the deal, which will still need to get regulatory approval.
John Pecman, Commissioner of Competition, said Monday the Competition Bureau will review the deal.
"While media ownership concentration can raise other public interest concerns, under the Competition Act, the Bureau’s mandate is to review mergers exclusively to determine whether they are likely to result in a substantial lessening or prevention of competition,” he said.
Quebecor will focus on its fledgling telecom business Videotron, its French-language newspapers and the Sun News Network, which has been struggling with millions in annual losses as it repeatedly tries to make its case to the regulator that it is being treated unfairly by cable companies in how it is distributed. Sun News Network was not included in the deal because it was not for sale, Godfrey said. The channel will be able to keep the Sun name under a licensing agreement with Postmedia but will have one year to change its logo.
Quebecor has been unloading its newspaper assets in recent month, finalizing the sale of 74 Quebec weeklies to Transcontinental for $75 million in June.
Its CEO Pierre Dion noted that the deal comes at a time when newspaper revenue has been declining year-by-year as they try to compete with as an onslaught of digital media for scant advertising dollars.
“This transaction therefore comes at a time when the Canadian newspaper business absolutely needs consolidation to remain viable and to compete with digital media," he said.
The CWA Canada union, which includes Sun Media and Postmedia employees among its members, said the deal was "hopeful, troubling and puzzling," citing debt levels at Postmedia and its moves to slash resources and lay off employees.
"On the optimistic side, we hope this means Postmedia will put more money into quality journalism, especially at Sun Media where journalism has been on life support under Quebecor," said CWA Canada president Martin O’Hanlon.
"But the deal sounds instant alarm bells over concentration of ownership, with Postmedia set to hold a near monopoly on English-language newspapers in Canada."
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