The owner of the Toronto Star and other community newspapers revealed Tuesday evening that it reached a $52-million acquisition deal with NordStar Capital LP, a firm run by businessmen Paul Rivett and Jordan Bitove.
Bitove said he had been watching Torstar for some time before getting Rivett involved and approaching the company and its board chair John Honderich with a deal.
"I think what he saw in Paul and I were two young guys who were prepared to roll up their sleeves and put their shoulder to the wheel," Bitove, who delivered newspapers as a child, said in an interview after the deal was announced.
The pair said they have no current plans to shutter papers or lay off staff and that they are committed to upholding the Atkinson principles, a set of ethics Torstar has long used to guide its coverage. Torstar owns the Toronto Star, Hamilton Spectator, Waterloo Region Record, St. Catharines Standard, three other dailies and some 70 weeklies.
The NordStar offer is 63 cents per share for all of Torstar's outstanding Class A shares and Class B non-voting shares.
Torstar's shares closed at 40 cents at the end of trading Tuesday, but the company says the 63 cents per share it agreed to represents a nearly 67 per cent premium on the 20-day volume-weighted average trading price of the Class B non-voting shares.
The deal takes control of the company away from five families — the Atkinsons, Hindmarshs, Campbells, Thalls and Honderichs.
The five stepped in to run the Star after founder Joseph Atkinson died in 1948, leaving the paper to a charitable foundation to be run by trustees.
The Star's website says a retroactive change in Ontario law barred such a foundation from owning more than ten per cent of any profit-making business, so the trustees were given court permission to buy the paper in 1958, after promising to uphold its long-standing traditions.
The site says the deal was worth $25,555,000 — the highest price paid to that date for a newspaper property.
John Honderich, a former publisher of the paper, said in a letter posted Tuesday that it was a difficult decision, but the families have "come to realize that for Torstar to succeed now, it requires new ownership with both resources and determination" because the business model for newspapers has come under "immense pressure."
"In this new digital era, with Facebook and Google taking the lion’s share of all digital advertising, media outlets have been going under across North America. The COVID-19 crisis has made the situation even worse," he said.
"Torstar is far from immune from these pressures. We have tried to innovate and adopt new strategies to succeed in this new world. But quite frankly, it has been an uphill struggle."
Three weeks ago, the company reported a $23.5-million loss for the first three months of 2020 as revenue dropped 20 per cent from the same time last year — with advertising further declining and the distribution of paper flyers drying up due to physical distancing precautions.
Torstar chief executive John Boynton told shareholders on May 6 that public interest in the COVID-19 health crisis and the concurrent economic slowdown resulted in "a significant increase in digital traffic to our sites, beginning in March and continuing into the second quarter.''
Unfortunately for Torstar, he said, the increased traffic has not driven digital advertising revenues because some marketers blocked the placement of ads on any sites that mentioned COVID-19, due to brand image concerns.
Rivett and Bitove know they are in for a challenge.
"Everybody knows that traditional media is struggling. We see lots of opportunities...to get involved in assisting the current management to make things better," said Rivett, who recently retired from Torstar's largest independent shareholder Fairfax Financial Holdings Ltd. Bitove was part of the group that founded the Toronto Raptors basketball team.
Going private, Rivett added, will offer better conditions for the days ahead.
"It's tough when you're trying to fix a business, but doing it in a public spotlight with quarter-to-quarter reporting and quarter-to quarter-expectations ... it's just tough to do that in the public realm, so to take it private takes a lot of that pressure off management."
Torstar's share price has suffered from the company's inability to generate enough revenue or cost savings to pay quarterly dividends, which were suspended last year. The suspension pushed the publicly traded B shares to what was then the lowest level since at least the late 1990s — 53 cents.
The company has faced several rounds of layoffs, most recently 85 lost jobs announced in April, and has closed many community papers over the last few years as it has tried to transition to digital products.
It launched a $20-million tablet-based news product called Star Touch in 2015, but low readership saw the project later scrapped.
Torstar holds an investment in The Canadian Press as part of a joint agreement with subsidiaries of the Globe and Mail and Montreal's La Presse.
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