TORONTO – Canwest Global Communications Corp. has found a buyer for the country’s largest newspaper chain, agreeing Monday to sell its publishing division to a group of its creditors being led by National Post president and CEO Paul Godfrey for $1.1 billion.
The announcement ends months of uncertainty over whether the division would be broken apart and sold off piecemeal to rivals, including Torstar Corp., in order to appease creditors of Winnipeg-based Canwest.
In a statement, the incoming ownership group said it plans to “maintain all existing newspaper operations” while it seeks approval from the court and plots the path of the new company, which includes plans to go public.
Alongside the National Post, the chain includes such established dailies as the Montreal Gazette, the Ottawa Citizen, Calgary Herald and Vancouver Sun.
A major component of the strategy is installing as chief Godfrey, an executive whose acumen and experience in the newspaper industry extends back decades. In an interview, the 71-year-old executive was steadfast in his resolve that the chain – and newspapers in general – have much room to grow, but there are new realities to be embraced.
“We’re going to have to do business a little bit differently,” Godfrey explained. “Newspapers are in a transition to the digital world . . . and the chain will be digital-first newspapers.”
Digital ad sales represent under 10 per cent of the $1 billion or so the Canwest Ltd. Partnership took in revenues last year. Godfrey says he would like to see revenues from digital operations increase to about 25 per cent.
“As digital revenue grows and we can stabilize print revenues, the upside is phenomenal for this organization,” he said.
These are lofty goals, Godfrey concedes, but attainable with the right management team that he has yet to finalize.
Godfrey dismissed the National Post’s longtime critics who have been predicting the paper’s demise since its first edition was published in 1998.
“The (National) Post is here to stay. Our competition can put away the obituaries they’ve prepared because they are never going to see the light of day,” he said.
Godfrey’s financial partners are a coalition of about 20 financial institutions consisting of private-equity and hedge-fund firms. The biggest is New York-based Golden Tree Asset Management, which owns about $150 million of the publishing division’s debt.
Collectively, the group owned about $450 million, or just under a third, of Canwest Ltd. Partnership’s overall debt when the newspaper chain filed for creditor protection on Jan. 8.
Instead risking a loss on their investment, the group is betting it can turn things around.
Canwest’s primary backers, the big banks, were owed more – $925-million in secured debt. Upon the filing, Scotiabank and Canada’s other commercial banks closed in, proposing to seize the unit and sell it to the highest bidder in order to recoup what they were owed.
It appeared Torstar, the owner of the Toronto Star, would be the victor after reports surfaced around the April 30 deadline indicating it had made the highest offer.
Sources Monday said the newspaper rival’s price was “substantially” lower than the one tabled by the winning investor group, which is offering about $950 million of the deal in cash to provide Canwest’s secured lenders “a full payout.”
In a separate statement, Torstar president and chief executive David Holland said: “We took a long, hard look at this opportunity. In the end, the successful price as well beyond what we were prepared to pay. We wish the new owners well.”
The sale, if approved, marks the loss of the Asper family’s last hold on the media empire founded by the late Izzy Asper with a single Winnipeg TV station in the mid-1970s.
Earlier this month, Canwest said it would sell its entire television operations to Shaw Communications Inc., in deal worth $2 billion. Canwest’s biggest division, which owned the Global network, as well as a portfolio of successful specialty channels, filed for creditor-protection separately from the publishing division last October.
It is believed that Leonard Asper, the second-oldest son of Izzy, who assumed the role of CEO in 1999 but stepped down earlier this year, had prepared a competing bid but failed to reach the final stage of the sale.
Canwest’s board approved the sale, as did Canwest’s appointed monitor, FTI Consulting. The company will now seek court consent on May 17 and expects to close the transaction by mid-July.
Godfrey manned the helm of Sun Media Corp., owner of the Toronto Sun until 2000, helping the organization’s sale to Quebecor Inc., in a deal worth almost $1 billion. Godfrey left the newspaper business to join the Toronto Blue Jays organization but returned in January 2009 when he was appointed to the corner office at the National Post.
Now, he faces the task of managing the entire group, which starts with a more harmonized approached.
It’s a strategy, he said Monday, he’s looking forward to implementing.
“There’s no doubt that this chain of papers has the ability to offer advertisers the ability to get a consistent message across the country,” he said. “We have to take greater advantage of this fact. We can’t operate in silos, we have to operate as a unified chain.”
The other daily papers in the chain include the Windsor Star, the Saskatoon StarPhoenix, the Regina Leader-Post, the Edmonton Journal, The Province in Vancouver, the Victoria Times Colonist and the Nanaimo Daily News as well as several related Internet properties and a stable group of community newspapers.
With files from Tim Shufelt
National Post
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