Postmedia–Sun deal: Three key questions
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Oct 06, 2014  |  Vote 0    0

Postmedia–Sun deal: Three key questions

Why are community papers key, who is backing the deal, and what happens to Sun TV?

OurWindsor.Ca

A few questions surrounding the Postmedia-Sun Media deal:

Why are community newspapers key?

While most of the focus on the proposed deal is on newspapers in major urban markets, smaller newspapers across the country will also be scooped up by Postmedia.

Under terms of the agreement announced Monday, Sun Media’s stable of more than 100 community papers — from Brockville This Week to the Vulcan Advocate in Alberta — along with small dailies in 18 markets including Barrie, Woodstock and Sudbury, will also have a new owner.

Postmedia says this is an important factor in the acquisition, since the Sun’s smaller properties would provide 20 per cent of Postmedia’s revenue if the deal passes regulatory scrutiny.

“This is really quite different because we are acquiring a huge number of community newspapers, and in markets that we are not in,” said Postmedia president Paul Godfrey in a conference call with analysts.

The Competition Bureau has never blocked a newspaper takeover in Canada, although it has required some divestitures in previous mergers to complete deals.

While Godfrey insisted that the urban-market newspapers will continue to run autonomously, he provided no such guarantee for the future survival of the community papers Postmedia will inherit.

Who is the U.S. investor backing the deal?

Founded in 2000, GoldenTree Asset Management is a New York-based hedge fund that manages accounts for institutional and high-net-worth investors. The firm is Postmedia’s largest shareholder and was one of the lead investors and biggest bond holders in the former CanWest LP.

As part of this proposed deal, GoldenTree will backstop Postmedia’s planned equity rights offering of $186 million less the net proceeds of any real estate proceeds prior to launch.

The company has also signed a voting restriction agreement with Postmedia that will limit the number of votes it will be entitled to cast at any meeting of Postmedia’s shareholders to one third less one share of the total number of outstanding voting rights.

The firm’s founding partner, Steve Shapiro, was one of CIBC World Markets’ advisers on the deal that saw Godfrey’s management group buy Toronto Sun Publishing Co. from Rogers Communications Inc. back in 1996. The group paid $411 million, and three years later sold the chain to Quebecor Inc. for $983 million.

Ryerson journalism professor emeritus John Miller said he was struck by Monday’s $316 million price tag for Sun Media.

“That’s not very much for just the Toronto Sun, let alone 175 more newspapers and publications,” he noted.

“The price has gone down with each exchange — and it’s now at the ridiculous level,” Miller added.

Godfrey argues that “it’s not exactly the same chain. I would say 75 per cent of it is the same.”

What happens to Sun News Network?

Sun Media’s controversial television channel is not included in the deal and will remain with Quebecor Media.

Godfrey told reporters, “It wasn’t for sale . . . We are in the print and digital business.”

Toronto Star

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