Quebecor to acquire Osprey newspaper chain; CanWest sells Metro stake

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TORONTO (CP) – Quebecor Media Inc., owner of the Sun tabloid newspaper chain, is buying the Osprey newspaper group in a friendly deal worth $517 million, including debt.

And CanWest has sold its one-third interest in the Metro Vancouver and Metro Ottawa free daily newspapers to partners MetTorstar Corp. (TSX:TS.B) and Metro International S.A., giving them stakes of 50 per cent each.

The sale of Osprey Media Income Fund (TSX:OSP.UN) to Quebecor not only ends Osprey’s spring search for a buyer, but more than a century of newspaper publishing for the Sifton family, one of the oldest names in the Canadian industry.

Quebecor Media, a wholly owned subsidiary of Quebecor Inc. (TSX:QBR.A), said it will pay $7.25 per unit of Osprey Media Income Fund (TSX:OSP.UN), valuing it at $355.5 million. The total enterprise value is $516.9 million.

“We believe that the addition of the assets of Osprey to our existing portfolio in the print media sector will make our organization better equipped to meet the challenges facing our industry,” Pierre Karl Peladeau, president and CEO of Quebecor Media said in a release late Thursday.

“With the combination of Sun Media and Osprey, Quebecor Media consolidates its role as a leader in the industry.”

The bid is a 30.6-per-cent premium over the March 5 closing price of the units, which is the last trading day before Osprey Media said it was undertaking a strategic alternative review process, including possible sale.

The bid also represents a 4.8-per-cent premium over the $6.92 closing price of the units on Thursday.

Scotia Merchant Capital Corp. and Ontario Teachers Pension Plan, the principal unitholders of Osprey Media, have agreed to tender to the offer approximately 53.9 per cent of the total units outstanding.

As part of the deal, Osprey can consider and accept a superior proposal, giving Quebecor Media the right to match. However, if a higher bidder wins, Osprey must pay Quebecor Media a $15-million break fee.

Markham-based Osprey said its board and a special committee formed to review takeover offers unanimously recommend unitholders accept the bid.

“The offer from Quebecor Media reflects a strong value for unitholders while providing an excellent strategic fit for our newspapers”, Michael Sifton, president and CEO of Osprey Media said.

Sifton is great-grandson of Sir Clifford Sifton, a federal cabinet minister who bought the Winnipeg Free Press in the 1890s.

Osprey was formed in 2001 when a group of investors, including the Ontario Teachers’ Pension Plan and Sifton, bought assets from the former Hollinger newspaper group for $220 million.

Sifton had originally held a position on Hollinger’s board after Conrad Black’s company bought the two Saskatchewan dailies that were owned by his family.

After acquiring further assets from CanWest Global Communications Corp. (TSX:CGS) for $195 million, Osprey became one of Canada’s biggest publishers of daily and non-daily newspapers, magazines and specialty publications.

The company currently owns 21 dailies and 33 non-daily papers, as well as shopping guides, magazines and other publications.

As part of a plan to handle its acquired debt, the company was spun out into a trust in 2004, but troubles continued as the newspaper industry was hit with declining profits and Osprey responded by cutting costs.

Osprey’s financial picture was made worse by the trust sector’s reaction to Ottawa’s decision last October to start taxing income trusts in 2011.

Last year, the company lost $113.4 million after writing off $170 million in goodwill, a non-accounting measure that usually means a company paid more for acquisitions than they were worth.

Quebecor currently owns eight daily newspapers in major cities: Le Journal de Montreal, Le Journal de Quebec, the London Free Press and Sun-branded papers in Ottawa, Toronto, Winnipeg, Edmonton and Calgary.

It also publishes nine local dailies:

-In Ontario, the Brockville Recorder and Times, the Stratford Beacon Herald, the St. Thomas Times-Journal, Kenora’s Daily Miner and News, the Simcoe Reformer and the Woodstock Sentinel Review.

-In Alberta, the Daily Herald Tribune in Grande Prairie and Fort McMurray Today.

-In Manitoba, Portage La Prairie’s Daily Graphic.

The chain also publishes seven free commuter dailies under the 24 heures and 24 Hours banners.

Quebecor Media also owns operating companies in other media-related businesses: Videotron Ltd., the largest cable operator in Quebec; TVA Group Inc., operator of the largest French-language conventional television network in Quebec, a number of specialty channels, and the English-language Sun TV.

Prior to the announcement, Quebecor shares closed up 23 cents to $41.65 on the Toronto Stock Exchange Thursday.

The sale of CanWest MediaWork Publication Inc.’s stake in the Vancouver and Ottawa Metro papers creates a new ownership structure that “extends the solid foundation that already exists in the Metro operations in Toronto, Calgary and Edmonton,” said Jagoda Pike, president of Star Media Group and chair of the board of directors of the Metro newspapers in English-speaking Canada.

“With a consistent ownership structure now in place in all five English Metro markets, the Metro newspapers will be managed with a single-minded focus on the development and growth of the Metro brand across English Canada.”

Including the five Metro papers jointly owned by Torstar and Metro International, there are currently Metro newspapers in Canada’s six largest, which represent approximately 45 per cent of the total Canadian population. Metro is published in over 100 major cities in 21 countries across Europe, North and South America and Asia.

“We are pleased with this transaction as we had come to the conclusion that these two properties are no longer a strategic fit for our publishing group,” said Dennis Skulsky, President of CanWest MediaWorks Publications Inc.

The news comes after an announcement by the CanWest Global’s subsidiary last month that it was launching two community papers in Ottawa.

Canada’s biggest newspaper publisher said on April 23 that it was launching The Now EMC Ottawa East, serving downtown, and The Now EMC Ottawa-Orleans, covering eastern suburbs.

They are distributed with the daily paid-circulation Ottawa Citizen and through CanWest’s Flyer Force flyer-distribution unit.

The move involves a marketing and operating partnership between CanWest MediaWorks and the EMC Your Community Newspaper, published by Performance Printing, which has a network of– weekly papers in 12 communities.

CanWest’s Community Publishing unit includes 25 papers throughout Canada.

Ottawa and Vancouver’s free daily offerings also include 24 Hours, published by Quebecor Inc.’s (TSX:QBR.B) Sun Media.

Ottawa’s paid-circulation dailies are the Ottawa Sun and Le Droit, in addition to the Citizen, and Vancouver has CanWest’s Sun and Province.

CanWest MediaWorks’ holdings include nine other major metropolitan dailies, from the Montreal Gazette to the Victoria Times Colonist, along with the National Post and the array of community publications.

CanWest MediaWorks Publications is owned 74 per cent by CanWest Global Communications Corp., which also owns the Global TV network, and 26 per cent by CanWest MediaWorks Income Fund (TSX:CWM.UN).