Merger talks between Postmedia and the owner of Toronto Star fail

Talks to merge two of Canada’s largest newspaper publishers have failed.

Postmedia Network Canada Corp. and Nordstar Capital LP — the majority owner of the Toronto Star and dozens of other smaller newspapers under the Metroland banner — announced late last month that they had entered into nonbinding talks about a potential merger.

The framework of the proposed merger would have resulted in Postmedia transferring its dozens of newspaper titles to Metroland, with voting control of the new entity split 50-50 between the two parties.

But on Monday, the two sides announced that those talks have broken down and have failed to come to an agreement, “and the added backdrop of regulation and financial uncertainty prompted them to make the decision to end their negotiations.”

Both companies saddled with debt

The print journalism economy has been on a downward trend for years, but the pace of that decline has accelerated in recent years, due to an abrupt realignment of ad spending coupled with major declines in subscriber numbers.

Digital platforms are growing fast, but not profitable enough to fill the gap. Both companies are saddled with debt that has become increasingly expensive to finance as interest rates have risen in recent months.

Postmedia has hundreds of millions of dollars in debt on its books, most of which is $177 million in bonds, maturing in 2027, with an interest rate of 10.25 percent.

Nordstar, meanwhile, has at least $55 million in unsecured debt on its books, with an interest rate of 10 percent.

When the merger was first proposed, the “core idea,” the two companies said, was “to create a new entity with reduced debt.”

In a statement, Jordan Bitove, owner of Nordstar and publisher of the Toronto Star, said the company remains committed to the news business.

“These are challenging times for media companies, but we intend to continue to work hard to bring Canadians the news they need to stay informed, which is essential for our communities and for the functioning of our democracy,” said Bitov.

“Torstar remains focused on addressing the existential threats to journalism in Canada, which have been heightened in recent weeks with announcements from Meta and Google that they intend to block access to Canadian news,” he added.