Torstar

Torstar Corporation is a Canadian media conglomerate. The company is primarily a publisher of daily and community newspapers, including its flagship and namesake, the Toronto Star. On May 26, 2020, Torstar announced a definitive agreement to be acquired by NordStar Capital LP, a private investment firm consisting of Jordan Bitove and Paul Rivett, for 63 cents per share. [2] The agreement was pending shareholder approval, with a shareholder vote scheduled for July 21, 2020. On July 9, the Globe and Mail reported news of a competing bid being established by Canadian Modern Media Holdings Inc., a group led by technology entrepreneurs Matthew Proud and Tyler Proud, as well as investment banker Neil Selfe, for 72 cents per share. [3] The NordStar bid was subsequently increased to 74 cents, with major shareholder Fairfax Financial and the family Voting Trust agreeing to lock-up their shares in support of the bid, even if another proposal was subsequently submitted, effectively ending the bidding war.[4] On July 20, Canadian Modern Media Holdings Inc. formally submitted an offer for 80 cents per share, which Torstar's board deemed "unworkable," in light of the fact that the voting trust and major shareholder Fairfax Financial had already committed to supporting NordStar’s offer. [5] The vast majority of shareholders voted to accept the Nordstar offer [6] and on July 31, a Court dismissed the objection against the plan.[7] On August 5, the transaction closed, and NordStar officially acquired Torstar.[8]

Torstar Corporation
Public
Traded asTSX: TS.B
ISINCA8914742074 
IndustryMass media
Founded1958
HeadquartersOne Yonge Street
Toronto, Ontario
Key people
John Boynton, President
OwnersJordan Bitove and Paul Rivett
Number of employees
4,000 (2016)[1]
DivisionsDaily News Brands
Metroland Media Group
Websitewww.torstar.com
One Yonge Street, the Torstar headquarters

History

Torstar was founded after the Ontario government passed a law barring the provisions of late-Toronto Star owner Joseph Atkinson's will from being enacted. Atkinson had bequeathed the newspaper to a charitable organization he had founded. The Progressive Conservative provincial government of George Drew passed a law banning charitable organizations from operating profitable entities such as newspapers. Rather than sell the newspaper, the trustees of the Atkinson Foundation bought out the Star privately and founded Torstar as a private corporation.

On November 26, 2010, it was announced that the Canadian Press news agency would be taken over by a for-profit corporation, with Torstar serving as one of its investors.[9] In December 2011, Torstar acquired a 25% minority stake in specialty television channel owner Blue Ant Media.[10]

On November 27, 2017, Postmedia and Torstar announced a transaction in which Postmedia will sell seven dailies, eight community papers, and the Toronto and Vancouver 24 Hours to Torstar, in exchange for 22 community papers and the Ottawa and Winnipeg versions of Metro. Except for the Exeter Times-Advocate, St. Catharines Standard, Niagara Falls Review, Peterborough Examiner, and Welland Tribune, all acquired papers will be closed. Torstar stated that it wanted to focus on building synergies within its existing markets served.[11][12] The swaps effectively remove competition between the two companies in the affected markets;[13] the Competition Bureau stated that it would review the proposed deal.[14] and in March 2018, formally accused the companies of using no-compete clauses to reduce competition in the newspaper industry, in violation of the Competition Act.[15][16]

On September 20, 2018, Torstar announced that it would acquire iPolitics.ca to enhance its coverage of the federal government.[17]

On December 20, 2018, Torstar applied to the Ontario Superior Court for an order to keep documents seized from its offices by the Competition Bureau sealed from the public.[18]

Contested Sale to NordStar

Initial NordStar Proposal

On May 26, 2020, Toronto Star publisher John Honderich announced the sale of Torstar to Nordstar Capital LP, controlled by Jordan Bitove and Paul Rivett, for $52-million. The price for the class A voting shares and class B non-voting shares was set at 63 cents in the deal. At the time of the most recent quarter, Torstar had $69-million in cash on its balance sheet – more than the $52-million acquisition price from Nordstar. [19] However, Torstar’s share price had suffered from the company’s inability to generate enough revenue or cost savings to pay quarterly dividends, which were suspended late in 2019. The suspension pushed the publicly traded B shares to what was then the lowest level since at least the late 1990s — 53 cents.[20] Weeks prior to the announcement of the deal, Torstar had reported a $23.5-million loss for the first quarter of 2020.[21]

The new owners planned to make Torstar a private company with former Premier of Ontario David Peterson as chair of the board. The initial financing for the deal was reported to be provided by Canso Investment Counsel Ltd. [22] Canso is also a major debtholder of Postmedia, which owns a chain of newspapers across Canada including the National Post. [23] Canso also held just under 1% of the class B non-voting shares of Torstar. Since 2017, the largest shareholder in Torstar was Fairfax Financial, owning 40% of the company's class B shares.[24] Canso and Fairfax had a history of investing together, with the most notable example being BlackBerry. [25] Canso and PointNorth (a fund launched by Jordan Bitove [26]) also had a history of investing together, most notably the privatization of AGT Food and Ingredients. [27] Prior to the announcement of the Torstar deal, Paul Rivett had recently retired as the president of Fairfax after 17 years with the company. Rivett remains on the board of directors of certain Fairfax investees and will keep his position as chair of Recipe Unlimited. [28]

In a published statement, Paul Rivett said that Nordstar would work to ensure the "long-term viability of the business" and to continue the Torstar publications' values. "Torstar was formed around these values [the advancement of society], the Atkinson Principles, and I can assure you that if the agreement is approved, they will continue to serve as the organization’s intellectual foundation."[29]

Canadian Modern Media Holdings Proposal

Shareholders were to meet to vote on the NordStar offer on July 21. In the meantime, news reports on July 8, indicated that another purchaser, under the name Canadian Modern Media Holdings Inc. (CMMH), had expressed interest in making an offer, said to be worth $58-million, or 72 cents per share. [30] The group was led by Matthew Proud, CEO of legal software firm Dye & Durham Corp., his brother Tyler Proud, CEO of technology company Avesdo Inc., and Neil Selfe, financial industry veteran and founder of INFOR Financial Group. Former Ontario finance minister Greg Sorbara was also involved. [31] As of July 9, the Torstar board continued to support the NordStar bid.[32]

The CMMH proposal, included a promise of contingency payments to shareholders from future asset sales, which were potentially worth at least another 50 cents. [30] The rival bid was conditional on being deemed a 'superior proposal' by Torstar's board, and would need to gain the support of the controlling shareholders, namely Fairfax Financial and the voting trusts’ Honderich, Hindmarsh, Campbell and Thall and Atkinson families. The Torstar board stated representatives of the trust and Fairfax did not intend to support the CMMH bid. [30]

NordStar Revised Proposal & Final Sale

On July 11, the NordStar bid was increased to $60-million, or 74 cents per share, with the Voting Trust and Fairfax revising their soft lock-up agreements, to hard lock-ups. [33] This effectively put an end to the bidding process because the terms of the revised bid meant that "the Voting Trust and Fairfax can’t change their votes to support any other bid".[34]

In the shareholder vote held on July 21, 99.7% of the class A shareholders favoured the NordStar offer as did 98.1% class B shareholders. However, only 81.9% of minority shareholders (not including the Voting Trust or Fairfax Financial) voted to accept the NordStar offer.[35] On July 23, Blake, Cassels & Graydon LLP, an international corporate law firm representing Torstar, brought forth a motion on behalf of Torstar before Ontario Superior Court Justice Gilmore to approve Torstar’s plan of arrangement with respect to the acquisition of Torstar. [36] Grant Vingoe, chair of the Ontario Securities Commission, had previously said in a letter to Andrea Horvath that the court was the appropriate venue to challenge the proposal. [37] He further said that the test to be applied by the court was whether the process leading to the arrangement was fair and reasonable.

Two shareholders appeared before justice Gilmore and expressed concern that the process was deeply flawed and that as a result they did not receive fair value for the shares. [38] One of those shareholders was a former Torstar EVP and former publisher of the Hamilton Spectator, who owned over 1-million class B shares. The other shareholder was the second largest shareholder of Torstar class B shares, outside of Fairfax Financial and the members of the Voting Trust. After the one hour online hearing, Justice Cory Gilmore delayed the Ontario court's decision on whether to approve the takeover of Torstar. The decision on the $60-million bid was put off after Justice Gilmore said she needed more time to examine written submissions by NordStar, Torstar, rival bidder Canadian Modern Media Holdings, and the minority shareholders. [39]

On July 25, the Globe and Mail published an interview with Butch Folland, a significant member of Torstar’s voting trust and the great grandson of the founder of Torstar, Joseph E. Atkinson, Torstar’s original publisher and the author of the Atkinson Principles. Mr. Folland is also the grandson of Harry Hindmarsh, who was President of the Star following Mr. Atkinson’s death in 1948. His personal ties to the Toronto Star date back to age 13 when he took a job as an office boy. In that article. Mr. Folland is quoted as saying “I was really disappointed in the outcome. I felt that the process wasn’t really fair in the way it affected me.” [40]

Late in the evening on July 27, an Ontario court approved the $60-million takeover of Torstar Corp. by private equity firm NordStar Capital LP over the objections of the rival bidding group, which immediately said it planned to appeal the judge’s decision. [41] Ontario Superior Court Justice Cory Gilmore ruled NordStar, controlled by entrepreneurs Jordan Bitove and Paul Rivett, could close their purchase of Torstar, setting aside requests from competing bidder Canadian Modern Media Holdings Inc. to re-open an auction of the company. CMMH had formalized its rumoured bid the previous Monday, having submitted a formal offer for 80 cents per share for Torstar on July 20, more than a week after the families and Fairfax pledged their support to NordStar.

Canadian Modern Media Holdings Inc. had complained that shareholders were not given the opportunity to assess that bid, and that the nondisclosure agreements (NDA) they were subject to prevented the details from being made public. After the ruling, CMMH said it would seek leave to appeal the decision, saying it still believes that the NordStar deal is "neither fair nor reasonable." As such, CMMH stated it expects to "immediately commence an appeal of today’s decision and will seek a stay of Justice Gilmore’s decision, preventing the closing of the plan, pending the determination of the appeal."

On July 31, 2020, the Ontario Superior Court of Justice rejected the appeal. [42]The judgement by Justice Michael Penny included this comment: "Having carefully read the material filed and considered the submissions of the parties, I have concluded that the motion for a stay of the order ... must be dismissed." The deal was expected to close during the following week.[43]

Operations

Torstar's media operations are divided into two primary divisions: Daily News Brands, Community Brands and Digital Ventures.

In September 2018, Torstar announced a deal to acquire the existing political news website iPolitics, effective on 1 October 2018. The initial coverage of the deal did not clarify which of the following divisions of the company would be the formal owner of iPolitics.[44] Torstar did announce that iPolitics would maintain its own bureau in Ottawa.[45] After the sale was completed, Torstar laid off five of the publication's staff, and appointed Marco Vigliotti as the senior editor.[46]

Daily News Brands

The Daily News Brands (Torstar) division primarily comprises the Toronto Star and its associated properties, including Torstar Syndication Services. The division also owns another six Ontario regional daily newspapers and a stake in the Canadian edition of the Chinese-language Sing Tao Daily.[47]

The StarMetro (newspaper) chain with free dailies distributed in Calgary, Edmonton, Halifax, Toronto, and Vancouver was part of this Brand but publication of all titles ceased by the end of 2019.

Community Brands

The Community Brands division, Metroland Media Group, owns more than 70 weekly community papers as of late May 2020, the free magazine Canadian Immigrant, and other community-oriented properties.[48]

VerticalScope

On July 29, 2015, Torstar announced its acquisition of a 56% majority stake in VerticalScope, a Toronto-based operator of online communities, for $200 million. The company operates websites and message boards that focus on niche categories, particularly within the automotive industry. Torstar CEO David Holland explained that the purchase was designed to bolster the company's presence in digital media.[49]

In 2017, Torstar discontinued the operations of VerticalScope.[50]

Star Touch and ePaper apps

Launched in 2015, Toronto Star Touch was the company's app designed specifically for tablet computers. It was discontinued in late July 2017 after an investment totaling $20 million because of an inadequate volume of readers and advertisers and was replaced by ePaper.[51] The latter is "a new universal app" (a digital copy of the print version of the Star) available for both Android and iOS smartphones and tablets.[52][53]

Other investments

Torstar owns a 20 per cent stake in the Victoria, British Columbia-based newspaper publisher Black Press,[54] and a 16 per cent stake in broadcaster Blue Ant Media. The company is also part owner of The Canadian Press.[55]

Past investments

Torstar launched a weekly celebrity-based magazine called Scoop in 2005, which folded one year later.

Between late 2005 and early 2011, Torstar also held a 20 per cent stake in CTVglobemedia, a Canadian media company which broke up when BCE Inc., the parent company of Bell Canada, purchased the company's media assets.[56] This caused some controversy because CTVgm owned The Globe and Mail, a competing newspaper to Torstar's own Toronto Star. There were no editorial hurdles between the two newspapers however. Torstar sold its shares in 2011.

On May 2, 2014, Torstar announced the sale of Harlequin Enterprises, a publisher of romance novels, to HarperCollins for $415 million.[57][58]

Corporate governance

Current members of the board of directors of Torstar are:

gollark: No, eggs.
gollark: Fish, that is.
gollark: At best he can get, what, 16-24 eggs a day?
gollark: I wonder if there's a way to make it fairer. Maybe measure latency then delay stuff based on that. It would be hard and probably abusable though.
gollark: It would be a few MB/s, but my computer is on Ethernet via powerline adapter.

See also

References
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