Postmedia And Toronto Star In Talks To Merge

Postmedia Press Release:

In light of unusual trading activity, Postmedia Network Canada Corp. (“Postmedia”) today confirmed that Nordstar Capital LP (“Nordstar”), owner of Metroland Media Group and the Toronto Star, and Postmedia have entered into non-binding discussions to consider a combination of Postmedia, together with the Metroland newspapers and certain operational assets of the Toronto Star, through a potential merger transaction.

The merged entity, which is yet to be named, would be jointly owned and jointly controlled by Nordstar (which would have a 50% voting interest and 44% economic interest) and existing Postmedia shareholders (who would have a combined voting interest of 50% and a combined economic interest of 56%).

Jordan Bitove, Publisher of the Toronto Star and owner of Nordstar, would be Chairman of the merged entity and Andrew MacLeod, CEO of Postmedia, would be CEO.

The Toronto Star would maintain its editorial independence from the merged entity through the incorporation of a new company, Toronto Star Inc., which would manage editorial operations of the Toronto Star. Nordstar would retain a 65% interest in Toronto Star Inc., and Jordan Bitove would remain Publisher of the Toronto Star.

The merger contemplates a significant reduction in overall debt through a conversion of a portion of the outstanding debt to equity, resulting in significant economic dilution to existing shareholders. This will result in an overall reduction in debt of the merged entity, providing it with stability to preserve and grow a strong national editorial infrastructure and maintain important brands.

“The core rationale for the proposed merger is to create a new entity with reduced debt, national digital scale to compete with the global technology giants and economies of scale in the business model. The proposed merged entity would provide the best opportunity to ensure strong news media coverage for Canadians from coast to coast,” said Andrew Macleod, President and Chief Executive Officer of Postmedia. “The news media industry in Canada and around the world is under existential threat, new models are urgently required. Scale, reach and efficiency are all prerequisites for future success and to compete with the global technology platforms. Canadians deserve and expect world-class journalism from trusted sources, and we are committed to preserving the editorial independence of all our newsrooms,” added Mr. MacLeod.

“The viability of the newspaper industry in Canada is at an extreme risk, especially in the small towns and communities that are important to this nation. By pooling resources and working collaboratively, we can ensure that more Canadians have access to trusted journalism and quality reporting. This will strengthen our democracy and protect the fabric of our country,” said Jordan Bitove, Publisher of the Toronto Star. “Preserving the editorial independence of our newsrooms, including the Toronto Star, is of particular importance to this arrangement going forward.”

The companies stress that the negotiation of this transaction is ongoing and is currently in the form of a non-binding Letter of Intent. There can be no assurance that definitive agreements will be entered into and on what terms. Any definitive agreement, if entered into, would be subject to a number of closing conditions and there are no assurances that such conditions will be satisfied or waived and the transaction will close.

Postmedia does not currently intend to disclose further developments with respect to the potential merger unless and until a transaction is entered into or negotiations otherwise conclude without a transaction being entered into.