Sunday, May 02, 2010
Deal would depend on wavering Fairfax Financial backing
Grant Robertson, Tara Perkins and Andrew Willis
Globe and Mail - Friday, Apr. 30, 2010
With bidding set to close tonight [April 30, 2010 - BC Mary] in the auction of chain of 46 newspapers, the parent company of the Toronto Star is on the brink of losing its key financial backer.
Fairfax Financial ... the deep-pocketed insurance company that teamed up with Torstar to make an offer on the newspapers, has told bankers it has decided against bankrolling the purchase, according to sources close to the matter.
The chain of papers includes 11 large dailies such as the National Post, Vancouver Sun and Ottawa Citizen, along with 35 community papers. At the heart of the matter is the financing Fairfax hopes to arrange. The newspapers are being sold off by CanWest’s creditors, which include Canada’s largest banks, who are trying to recoup $950-million they are owed by CanWest.
The Torstar bid would see the sellers paid entirely in cash, which makes it attractive to the creditors selling off the papers, since they would get their money up front.
However, Fairfax wants to finance the offer with a mixture of equity and bank financing, which has become a sticking point. Banks that have been approached by Fairfax are cautious about lending money to buy newspaper assets that have struggled, and are unable to see eye-to-eye with Fairfax on the terms of the financing.
The preliminary bids are said to have ranged from $850-million to $925-million, according to sources close to the auction.
To be considered, each group must submit a final binding bid Friday to RBC Dominion Securities Inc., CanWest’s adviser on the sale process.
The bank will spend the next few weeks sifting through the final offers and determining which one is most palatable. Because the secured creditors don’t want to stay on as operators or part-owners of the newspaper business, offers that include the most cash up-front are said to be most favourable.
Analyst Tim Casey at BMO Nesbitt Burns Inc. said in a research note this week that it is unlikely Torstar could do a deal without the backing of a well-heeled partner.
“In their totality, the assets represent a major acquisition for Torstar that would increase its exposure to daily newspapers and increase leverage,” Mr. Casey wrote. “A potential deal with Fairfax seems credible, but obviously we need information on terms and structure to assess its impact.”
If it proceeds, Torstar may also face regulatory challenges to its bid from the Competition Bureau, as a successful takeover of CanWest’s newspapers would give the company the lion’s share of daily newspapers in Central and Western Canada.
CanWest’s lenders, who currently control the chain, want a clean, quick deal. To help meet this goal, Torstar was urged by RBC to get preliminary guidance on its plans from the federal Competition Bureau, according to one executive familiar with the bidding process.
Torstar decided not to approach the competition watchdog, said the source, and that could introduce uncertainty into its bid that does not exist with rival bids.
Click HERE for the updated story.
BC Mary comment: [WooHoo, is what I'm saying!] Although financial arrangements at this level create some fresh doubts, I'd say that the Torstar Group is by far the best hope for Canadian media. Canada's largest newspaper, Toronto Star has -- over the long haul -- seriously demonstrated a policy of serving the public interest. Not perfect, as editors and publishers come and go, but Toronto Star has given this country an effort which no other Canadian daily newspaper matches. So I think we'd be lucky to see TorStar's base expand ... not least if it means that some of the other bidders, such as Leonard Asper, don't. Plus ...
Plus there's the interesting possibility that some of the small newspapers will be split off again from the conglomerate ... and that, in my view, is a good thing.
But while searching for the update, I found this, and didn't know whether to laugh or cry:
Read about that fiasco HERE. But is there an echo ... ?