Newspaper chain Postmedia Network Canada Corp. is in talks to merge with the owner of the Toronto Star, a deal that would reshape a domestic news industry that’s been crushed by falling revenue.
(Bloomberg) — Newspaper chain Postmedia Network Canada Corp. is in talks to merge with the owner of the Toronto Star, a deal that would reshape a domestic news industry that’s been crushed by falling revenue.
The two companies disclosed the non-binding discussions on Tuesday after a 56% jump in the price of Postmedia shares, which rarely trade.
Holders of Postmedia, which owns titles including the National Post and the Calgary Herald, would get a 56% economic interest in the merged entity, while private equity firm Nordstar Capital LP would get 44%. Closely held Nordstar and its publisher, Jordan Bitove, would keep majority control of the Star, one of the Canada’s largest newspapers, which would have editorial independence from the parent company.
The companies said they’re also considering a debt-for-equity swap that would lead to “significant” dilution for existing shareholders. Postmedia had C$287 million ($217 million) in long-term debt and lease liabilities as of Feb. 28, according to data compiled by Bloomberg.
Postmedia has lost about a third of revenue since 2018 because of falling advertising and circulation revenue. The company produced operating income of just C$13 million, excluding depreciation, amortization, restructuring and other costs, in the fiscal year ended Aug. 31. The company’s interest expense during the year was C$31 million.
“The news media industry in Canada and around the world is under existential threat, new models are urgently required,’ Postmedia Chief Executive Officer Andrew Macleod said in a statement.
Postmedia newsrooms have been gutted by staff cuts, and earlier this year the company told employees of the Vancouver Sun and Province, its major titles in Canada’s third-largest city, to work from home permanently so it could get rid of office space.
“The viability of the newspaper industry in Canada is at an extreme risk, especially in the small towns and communities that are important to this nation,” Bitove said.
Bitove and Paul Rivett bought the Star and other newspapers in 2020 in a C$60 million takeover of Torstar Corp. But the two men had a public falling out last year, partly over plans to cut costs, and they ended their partnership. Rivett had been quoted as saying the Star was losing C$1 million a week.
Last week, Prime Minister Justin Trudeau’s government passed a new law intended to force major technology platforms such as Alphabet Inc. and Meta Platforms Inc. to pay money to news publishers. Both companies have protested the law, and Meta has threatened to block news links in Canada on Facebook and Instagram rather than pay.
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