Canadian Ownership Landscape Shifts with DealsBack to News

Canadian newspaper publishers juggled properties and ownership stakes in the third quarter as the fallout continues following the large sales of Canadian newspapers by Hollinger and Thomson two years ago.

The largest transaction was a spinoff by CanWest Global Communications of several newspapers it had acquired from Hollinger in 2000. Montreal-based GTC Transcontinental paid C$255 million to acquire 10 dailies and more than 30 other publications in eastern Canada and Saskatchewan from CanWest, which needed to pay down debt.

The deal represents 2.6 times revenue and 8.4 times adjusted cash flow. Multiples paid for newspapers in Canada typically are far below those in the U.S. because Canadian law bars foreign ownership of media properties, resulting in a significantly smaller field of buyers for newspapers in Canada than in the U.S. Other factors tied to operational efficiencies and market growth also contribute to lower multiples.

Transcontinental, Canada’s largest publisher of consumer magazines, owns nearly 80 newspapers publishing in eight provinces. This transaction, however, brought Transcontinental its first daily newspapers, including the Halifax Daily News, the St. John’s Telegram, the Moose Jaw Times-Herald, and the Charlottetown Guardian.

After selling these smaller newspapers, CanWest will focus on its larger Southam dailies and television properties.

CanWest held on to some other smaller newspaper properties that it had initially offered for sale. Observers believe some CanWest newspapers may be offered to the public through an income trust.

Elsewhere, Canadian publisher David Black sold a 19.35% stake in Black Press Ltd. to Torstar Corp. for C$20 million. Black owns the Honolulu Star-Bulletin and a group of non-dailies in Washington State in addition to more than 80 community newspapers primarily in western Canada.

The deal gives Torstar, publisher of the Toronto Star, a presence in western Canada, while Black will have additional resources to pursue acquisitions. Black acquired the Star-Bulletin in 2000.

Torstar also owns dailies in the Ontario cities of Hamilton, Kitchener-Waterloo, Cambridge, and Guelph, as well as a company that publishes a number of smaller community newspapers.

Earlier this year, Hollinger expanded its presence in the New York City-area by taking a 29% stake in News Communica-tions, which owns Dan’s Papers in the Hamptons. Hollinger’s Conrad Black made a $2 million investment in the start-up New York Sun in the spring.

Finally, Kohlberg Kravis Roberts & Co. and the Ontario Teachers’ Pension Plan agreed to buy the telephone directories owned by Canadian telecom company BCE for C$3 billion. KKR joins a list of other large buy-out firms that are entering the telephone directory industry.

The deal includes the Yellow Pages unit of Bell Canada, which markets and distributes phone books to residents of Ontario and Quebec, in addition to online directories.