May 28, 2014 11:13 am

Transcontinental to sell 34 newspapers to get approval for Sun Media deal

The corporate logo of Transcontinental Inc.

Handout/The Canadian Press

MONTREAL – Canada’s competition regulator will approve a deal for Transcontinental Inc. to acquire 74 weekly newspapers in Quebec from Sun Media Corp. if the printing company tries to sell 34 newspapers.

The Competition Bureau said Wednesday that the condition will help preserve advertising competition in the small Quebec communities where these publications and their websites are located.

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Putting the newspapers up for sale will allow a third party to buy and operate the publications independently “to the benefit of both readers and advertisers,” said the regulator.

Under the terms of the agreement, Transcontinental will try to sell the 34 newspapers for a 60-day period. If no buyers come forward, then the company will be able to keep the newspapers.

Transcontinental said the sale process is being handled by a third-party chartered accountant firm, Mallette LLP.

Twenty-two of the publications that will be for sale are owned by Sun Media and located in small cities such as Shawinigan, Trois Rivieres, and Drummondville. The remaining 12 publications are already owned by Transcontinental, and located in Longueuil, Mont-Tremblant and Chambly.

READ MORESun Media sells 74 community papers in Quebec to Transcontinental for $75M

“We are pleased with this decision, which allows us to close the transaction and combine the strengths of both companies,” Francois Olivier, president and chief executive officer of Transcontinental Inc., said in a news release.

“We are enthusiastic that we will soon be able to welcome the employees of the Sun Media weekly newspapers in Quebec,” Olivier said.

Even if it sold all 34 publications, Transcontinental said it still expects the Sun Media acquisition to add $20 million to its operating earnings. Sun Media’s parent company is media and telcom company, Quebecor Inc.

RBC Capital Markets analyst Haran Posner said most of the papers named for sale were launched in recent years, and “likely have very limited profitability considering the state of the newspaper industry.”

Posner added that it was unlikely for a publisher outside Quebec to purchase a large portion of the publications. Instead, he expected the newspapers would be sold to smaller independent publishers within Quebec.

“Once the sale period has expired, TCL (Transcontinental) will review its remaining portfolio, at which point we expect the company will combine some newspaper brands in certain markets,” Posner said in a research note.

The Competition Bureau said the sale of the newspapers need to be offered at no minimum price, and require Transcontinental to provide distribution and printing to the new owner, by request, for a specific period of time.

“The Bureau understands that many communities are concerned and do not want to lose their local newspaper,” the regulator said in a statement.

“As many newspapers are in financial distress owing to the ongoing transformation of the community newspaper industry, the Bureau’s Consent Agreement seeks to maintain competition in local markets through a sale process in regions where the parties strongly compete against one another.”

Transcontinental had announced last December that it was going to buy 74 publications and related websites from Sun Media, a subsidiary of Quebecor Inc., for $75 million.

Now with approval from the Competition Board, Transcontinental says both companies will be finalize the deal over the next few days.

Quebecor Media still operates Quebec’s largest daily newspaper Le Journal de Montreal, Le Journal de Quebec, the 24 Heures free daily and the QMI news agency.

Transcontinental is Canada’s largest printer and publishes more than 30 magazines including Canadian Living and Elle Canada, as well as books and flyers. It also has a network of community newspapers in the Atlantic provinces and online portals such as AutoGo.ca and JobGo.ca, and is the owner of the Metro weekday daily in Montreal and co-owner of Metro Halifax.

© The Canadian Press, 2014

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