Postmedia and Nordstar Capital, owner of Metroland Media Group and The Toronto Star, have confirmed they are holding discussions about a potential merger.
In a statement issued Tuesday after market close, the companies emphasized that no definitive agreements are guaranteed and that negotiations are ongoing in the form of a non-binding letter of intent.
The merged entity, which is yet to be named, would be jointly owned and controlled by Nordstar and Postmedia. Both companies would have an equal voting interest, but Postmedia would have a 56% economic interest and Nordstar a 44% economic interest.
Jordan Bitove, publisher of The Toronto Star and owner of Nordstar, would be chairman of the merged entity and Andrew MacLeod, CEO of Postmedia, would be CEO.
In addition, The Toronto Star would maintain its editorial independence from the merged entity through the incorporation of a new company to manage the editorial operations of the newspaper. Nordstar would retain a 65% interest in what would be called Toronto Star Inc., and Jordan Bitove would remain the newspaper’s publisher
The Star has traditionally presented itself as a progressive voice in journalism through its Atkinson Principles, while Postmedia’s flagship National Post has typically been considered more right-leaning.
Postmedia issued its statement in response to “unusual trading activity.” The company’s stock was trading at $1.91 at the end of market close on Tuesday, up from $1.31 the day prior.
In the company’s statement, MacLeod said that in addition to creating “national digital scale to compete with the global technology giants and economies of scale in the business model,” the proposed merger would also significantly reduce the company’s debt through a debt-to-equity conversion plan. This, the company said, would providing the company with stability to “preserve and grow a strong editorial national infrastructure and maintain important brands.”
In addition to revenue challenges that have plagued most of the news industry, Postmedia has also struggled with a high debt load for much of its history. Its debt was $668 million when it restructured in 2016; a second restructuring of debt would come in 2019. The company reported $261 million in long-term debt in its Q2 financial reports.
During a dispute last year between Bitove and his Nordstar partner Paul Rivett over the direction of the company, Rivett claimed the Toronto Star was losing $1 million per week.
“The news media industry in Canada and around the world is under existential threat, new models are urgently required,” MacLeod said in his statement. “Scale, reach and efficiency are all prerequisites for future success and to compete with the global technology platforms. Canadians deserve and expect world-class journalism from trusted sources, and we are committed to preserving the editorial independence of all our newsrooms.”
Media consolidation continues, for better or worse
The merger would also be the latest in a trend towards consolidation in Canada’s news industry. Postmedia itself was formed when the National Post bought up newspaper assets owned by a struggling CanWest in 2010. The company then acquired English-language newspaper assets of Sun Media in 2015, as well as Brunswick News last year.
“We have experienced many mergers with Canadian media owners over the years,” says Lindsey Talbot, chief investment officer of GroupM Canada. “While the pros of a merger can be increased size, scale and leverage in a challenging media landscape, I am hoping they can retain their own brand identities and journalistic style of writing and reporting. Obviously, the downside will be potential redundancies as they aim to find efficiencies.”
Even as it has continued to acquire news assets, Postmedia has undergone significant staff reductions over the last decade, including closing many of its community newspapers. A 2020 report from The New York Times featured comment from Postmedia staff who said cuts and centralization had made its newsrooms “clones” of one another, having a significant impact on the quality of work.
“If pooling resources to combat this decline and gain competitive is the core of this approach, let’s hope for Canadians and advertisers, it works,” says Sarah Thompson, president of Dentsu Media Canada. “Local media needs scale but what is often overlooked is the quality of attention of the audience, and therefore the brand and business benefit as well to these media partners. Quality of journalism that these media bring generates a quality outcome for a brand.”
Shannon Lewis, president of the CMDC says the revenue challenges faced by news organizations mean that “it comes at no surprise that a merger between Postmedia and NordStar has been initiated to achieve economies of scale and strengthen a new offering with a full stack of data and scalability.”
The CMDC has previously committed to allocating 25% of investment to local media initiatives, part of its Media Manifesto to support local and community news outlets in Canada.
