Toronto Star owner in talks to merge with Postmedia

NordStar Capital, the company that controls the Toronto Star and Metroland Media, is in talks to merge with Postmedia, the publisher of the National Post, Toronto Sun and other daily newspapers across the country.

In a Tuesday afternoon press release, NordStar described a potential deal that would see NordStar and Postmedia each have 50 percent voting rights in an as-yet-unnamed company that would control most of the combined assets of both companies.

A separate company would be formed, Toronto Star Inc. named, for the editorial resources of the Toronto Star with the aim of ensuring editorial independence, the release said. NordStar would own a 65 percent stake in Toronto Star Inc. and NordStar owner Jordan Bitove would remain publisher of the Star.

Bitove would become chairman of the merged company, while Postmedia CEO Andrew MacLeod would become CEO. Any agreement to merge would be subject to regulatory approval.

“The viability of Canada’s newspaper industry is at extreme risk, especially in the small towns and communities that are important to this country. By pooling resources and working together, we can ensure that more Canadians have access to reliable journalism and quality reporting. This will strengthen our democracy and protect the fabric of our country,” said Bitove. “Maintaining the editorial independence of our newsrooms, including the Toronto Star, is of particular importance to this arrangement going forward.”

“The main rationale for the proposed merger is to create a new entity with less debt, national digital scale to compete with the global technology giants, and economies of scale in the business model,” said MacLeod.

“The news media industry in Canada and around the world is under existential threat, new models are urgently needed. Scale, reach and efficiency are all prerequisites for future success and to compete with the global technology platforms,” added MacLeod.

Lana Payne, national president of the country’s largest labor union, which represents workers at the Star and several Postmedia newspapers, expressed concern about the proposed merger in an emailed statement.

“For too many of our members and media workers, this must feel like Groundhog Day,” said Payne, who added that the union was concerned about the potential for more consolidation in the media industry and continued job losses.

“We at Unifor are deeply concerned about the continued consolidation of our Canadian news media,” said Payne. “We will continue to stress to all decision-makers in every possible way that this proposed merger cannot lead to the decimation of the media landscape in this country.”

While both NordStar and Postmedia would have 50 percent of the vote in the new company, Postmedia would have a 56 percent economic interest and NordStar would have a 44 percent economic interest, the release said.

The proposed deal includes a “significant reduction” in total debt for the combined companies, by converting some of the existing debt into equity. The companies say this would lead to “economic dilution of the existing shareholders” and “an overall reduction in the debt of the merged entity”, which the companies say will provide greater stability.

According to the most recent financial statements released in early April, Postmedia has $261 million in long-term debt.

The companies said they have signed a non-binding letter of intent and many details appear to have been worked out, but warned that “negotiations on this transaction are ongoing” and “no assurances can be given that any definitive agreements will be entered into and on what conditions.”

The company cited “unusual trading activity” for its decision to issue a press release.

Shares of Postmedia rose significantly during TSX Tuesday trading. The company’s B shares rose 53.9 percent to close at $2.00, while the company’s A shares rose 45.8 percent to close at $1.91. Both share classes also saw trading volume that was much higher than average.

Postmedia Network Canada Corp. is the holding company that owns Postmedia Network Inc., which operates more than 130 brands across multiple print, online and mobile platforms. It is majority owned by Chatham Asset Management, a New Jersey-based hedge fund.

In addition to the National Post and Sun newspaper chain, Postmedia publishes the Montreal Gazette, Ottawa Citizen, Calgary Herald, Vancouver Sun, Vancouver Province, and other newspapers.

NordStar is the company founded by Bitove and then-partner Paul Rivett to buy Torstar for $60 million in 2020.

In addition to publishing community and daily newspapers, including the Toronto Star, Hamilton Spectator, Waterloo Region Record, St. Catharines Standard, and Peterborough Examiner, NordStar also manages a number of online properties. It also has an indirect interest in NorthStar Gaming and other private investments.

Following the purchase of Torstar, Bitove and Rivett parted ways last November following an ownership dispute, with Bitove taking full control of the media company.

In 2017, Torstar and Postmedia exchanged 41 daily and community newspapers in a deal that saw 36 of the newspapers subsequently closed. The federal Competition Bureau investigated the deal fearing it violated the federal Competition Act, but decided not to press charges under the law.

“After reviewing the available evidence, the Bureau concluded that further action was not warranted,” the competition watchdog announced in 2021 at the end of its investigation.

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