Quebecor sells 175 Sun Media newspapers and websites to Postmedia

Quebecor has agreed to sell all 175 English-language newspapers it owns under the Sun Media banner to Postmedia, the owner of the National Post and others, for $316 million.

The properties include the Toronto Sun, the Ottawa Sun, the Winnipeg Sun, the Calgary Sun and the Edmonton Sun, as well as the London Free Press and the free 24 Hours dailies in Toronto and Vancouver.

The websites for those publications, largely based on the canoe.ca portal, are also included.

We have no plans to close anything- Postmedia CEO Paul Godfrey

The purchase price will consist of a mix of $140 million in new debt, plus $186 million of new equity, to be bought by Postmedia's existing owners.

"In order to survive and compete against the largest foreign-based digital businesses, we must be strong enough to fight and win," Postmedia president Paul Godfrey said in a note to staff after the deal was announced before stock markets opened Monday morning.

"Collectively, this stable of strong brands can do just that. When the transaction is approved, we will be able to offer advertisers the opportunity to reach the full scale and scope of their target audiences with a Canadian option for their marketing programs."

Cost savings

Postmedia says it foresees between $6 million and $8 million worth of cost savings annually from the two newspaper chains being able to streamline some operations. "But we have no plans to close anything," Godfrey said at a news conference discussing the deal.

The Sun News Network television channel is not included in the deal. "It wasn't for sale," Godfrey told reporters. "We are in the print and digital business."

While the big numbers in the deal trumpet Postmedia's dominance of Canada's newspaper industry, it's the digital assets that may prove to be, as Godfrey put it, "the jewel of the deal."

Mathew Ingram, a technology writer at Om Media, said the move buys debt-laden Postmedia some time, and some more revenues, to figure out its digital future.

"I don't think it's betting big that newspapers are going to save the company," he said in an interview. "Most people, to the extent that they want to consume this content, want to read it digitally on a mobile device.

"Your existing print business is in decline and that's not going to change," Ingram said.

Postmedia currently has about 2,800 employees across Canada, while Sun Media employs about 2,400 people.

Regulatory OK needed

If it goes through as announced, the deal would mean Postmedia, which was built out of the ashes of the former CanWest media empire, would control just about every major English-language newspaper in Canada that isn't based in Toronto (the publishing home of the Toronto Star and The Globe and Mail).

Godfrey said the deal came about after discussions that began several months ago about a possible outright merger between Quebecor and Postmedia. After the two companies did what he called "shadow-boxing" for several months, Godfrey said the current deal for just the English-language newspaper assets came out of that.

Postmedia says the chain plans to continue to operate both titles in markets where they now have the two market-leading newspapers, including Vancouver, Calgary, Edmonton and Ottawa.

The deal also includes 160 small-town newspapers across the country, as well as Sun Media's digital properties, including canoe.ca — although, notably, Quebecor will continue to operate canoe.ca in Quebec, which according to a Postmedia investor presentation makes up about half of that website's monthly traffic.

Thirty-five real estate assets in Ontario, Alberta and Manitoba are included and will become Postmedia property. The companies say they expect the deal to take about four to six months to meander through regulatory review.

"We've made the Competition Bureau aware that this was coming ... we don't believe in surprising people," Godfrey said.

For its part, the Competition Bureau said it would review the transaction.

"The Competition Bureau will review this proposed acquisition," it said. "While media ownership concentration can raise other public interest concerns, including some of the issues listed in the FAQs below, 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."