Quebecor has signed a deal to sell Sun Media Corp.’s English-language operations to Postmedia Network Canada Corp. for $316 million.
The deal includes 175 newspapers and publications, including the Sun chain of daily newspapers as well as the London Free Press and the 24 Hours dailies in Toronto and Vancouver.
“This acquisition brings together an impressive stable of brands that collectively create a stronger Canadian media platform that is better positioned to compete against foreign-based digital offerings and offers a greater range of choices to our readers,” Postmedia chief executive Paul Godfrey said, in a statement Monday.
“We intend to continue to operate the Sun Media major market dailies and their digital properties side by side with our existing properties in markets with multiple brands, as we have in Vancouver with the Province and the Vancouver Sun for more than 30 years.”
The sale also includes the Canoe web portal in English Canada, part of the national sales team based in Toronto, Quebecor’s Islington printing plant in Ontario and 34 real estate properties in Ontario, Alberta and Manitoba.
The purchase price is subject to a $10-million adjustment related primarily to properties to be sold by Sun Media prior to closing, and other customary adjustments.
If approved, the deal would give Postmedia control of most of the country’s major daily newspapers with the exception of the Toronto Star and The Globe and Mail.
Rod Phillips, Postmedia’s chair of the board, called the deal a “strong endorsement” of the future of the Canadian newspaper industry and “made-in-Canada” journalism. “We are excited to be the custodians of many of Canada’s best known and trusted media brands, now and in the future.”
Quebecor president and chief executive Pierre Dion said the deal comes at a time when the Canadian newspaper business needs consolidation to remain viable and to compete with digital media.
“The transaction will also keep Sun Media Corp.’s properties in the hands of a well-established Canadian group,” said Dion, in a statement.
“Postmedia possesses extensive expertise and the ability and will to invest in these publications’ long-term development. This is good news for the Canadian newspaper business and the people who work in it.”
Last year, Sun Media properties generated earnings before interest, taxes, depreciation and amortization of $90 million on revenue of $508 million. For the 12 months ended June 30, the properties generated adjusted revenue and EBITDA of $487 million and $87 million respectively.
Postmedia said it expected to find $6 million to $10 million in cost savings per year within two years.
The purchase will be financed with the issuance of an additional $140 million in senior secured notes by Postmedia and a rights offering of subscriptions receipts for shares in the company.
In an internal memo to employees, Godfrey described the deal as a “possible way forward” for the company.
“In order to survive and compete against the largest foreign-based digital businesses, we must be strong enough to fight and win,” he said. “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.”
Godfrey said growing audiences through the addition of the Sun Media brands supports the company’s “Postmedia Reimagined” strategy, offering advertisers extended reach for their programs across all platforms. Godfrey said the recent reimagining of the Ottawa Citizen has beaten internal targets, and said that the strategy is “moving the needle” on how the company interacts with audiences and what it can offer advertisers.
