The soon-to-be new owners of Torstar Corp., the largest and oldest newspaper chain in Canada, say that they have “no plans” to cut costs and instead will focus on “growth” and “marketing the incredible brand of the Star” — a sharp departure from the declining trajectory the media company has been following in recent years amid an industry-wide loss of advertising revenue.
“Traditional media is under siege. But we believe people will pay for good content,” said Paul Rivett, one of two Toronto businessmen behind the purchase. “What Torstar has, and has had for over 100 years is fantastic content. What they don’t have is the platform to deliver it.”
On Tuesday, Torstar, just weeks after reporting yet another deep decline in quarterly revenue announced that it was being acquired by NordStar Capital LP, a company owned by Rivett and Jordan Bitove.
The $52-million transaction, which was priced at a 67 per cent premium to the 20-day weighted average stock price, will involve taking the company private and the liquidation of all Class A and Class B shares owned by the founding families and other independent shareholders.
“What COVID-19 did to Paul and I was it made our resolve stronger that what the world needs and what Toronto needs and what Canada needs is fact-based journalism, and stories based only on truth. We want to inspire the journalists and editorial group to continue doing good work, without the distraction of having to meet certain quarterly targets,” Bitove said.
Bitove is the son of John Bitove Sr., a Canadian-Macedonian businessman and philanthropist who owned Bitove Corp., one of Canada’s largest food-service companies. Besides being a serial entrepreneur and on the board of the SickKids Foundation, he was involved in founding the Toronto Raptors, along with his brother John Bitove Jr.
Rivett, is a former president of Fairfax Financial, the insurance and investment giant led by Prem Watsa.
On Wednesday, he told the Post that Fairfax, which is Torstar’s largest independent shareholder with roughly 40 per cent of the company’s non-voting shares, would have no role whatsoever in the company going forward.
We think this is a very full and fair premium
Torstar’s stock price shot up 50 per cent on Wednesday to 60 cents per share, after the privatization deal was announced.
“For a business that is burning cash and has been burning cash for years now, and in the context of this market with the uncertainties of COVID affecting the topline, we think this is a very full and fair premium,” Rivett said. “For shareholders like Fairfax, they are taking the cash and it makes sense given the premium that we stretched ourselves to pay here.”
Torstar had a cash balance of $70 million at the end of the first quarter of 2020, and no bank debt, a balance sheet that short seller Jerome Hass of Lightwater Capital Partners called “sweet” in light of the $52 million that Rivett and Bitove paid for the company. “You are effectively paying the buyer $18 million to take this company off your hands,” he told the Post. Hass said he had been shorting Torstar stock for a decade until late last year, after the company suspended its dividend.
Although Torstar has spent the last year and a half embarking upon a “digital transformation” aimed at boosting its digital subscriber base, results have been mediocre, at best. Print and digital subscriber revenue grew by just 0.31 per cent in the last quarter of 2019, compared to a year prior. Then the pandemic hit, accelerating the decline in both print and digital ad revenue.
We wouldn’t be buying the paper if it wasn’t progressive
Rivett and Bitove, however, appear unfazed by the state of the media landscape in Canada and the way in which tech giants such as Facebook and Google continue to eat into advertising revenue, emphasizing that good content will ultimately prevail and grow Torstar’s subscription base.
“What this company really needs is a lot of love, a more patient approach, and a longer timeline of someone that can look after it for maybe three to five years,” said Bitove.
Hours after the deal was announced, questions swirled on social media about the founders’ commitment to the company’s progressive Atkinson’s Principles, given that both Bitove and Rivett have for years donated to the Conservative Party at both the provincial and federal levels, according to publicly available data.
“We wouldn’t be buying the paper if it wasn’t progressive, let’s put it that way,” Rivett said. “Jordan and I are both first-generation immigrants and believe in equality and social justice … but the most important thing is that the largest circulation of news in this country comes from progressive journalism.”
Bitove added that they would do nothing to “interfere” in the editorial independence of the newspaper. “Investigative journalism and the progressive philosophy of Torstar has brought it to where it is,” he said.
John Boynton, Torstar’s publisher and CEO said that Bitove and Rivett had been very vocal about preserving the Atkinson principles and “gone out of their way to publicly state as such.”
The acquisition will also involve the appointment of former Ontario Liberal premier, David Peterson as Vice-Chair of the company, as a custodian of sorts of the Atkinson values. “We don’t want to be a soft, right-wing brand. I have total faith in Jordan’s and Paul’s judgement and commitment to this venture,” Peterson said.
John Bitove Jr., a Canadian businessman whose ventures have extended into the food, sports, radio, real estate, and wireless sectors, says his younger brother, 55, has “been involved” in many of his businesses over the years.
“(With the) Raptors, Air Canada Centre, Olympic bids, he has been a great wingman and now he gets to lead this important asset,” Bitove, who is four years older than his brother, told the Post.
“I actually gave my Toronto Star paper route to him when I ‘retired’ delivering newspapers (at the old age of 14).”
He described the Torstar takeover and privatization as “a very complicated deal with lots of work to do,” adding that Phil Evershed, his partner at alternative asset manager PointNorth Capital, advised his brother and Rivett on the deal.
“Paul and and Jordan have known each other over 10 years and have been searching for something to buy together,” said Bitove.
“And now they will be fixing an important Canadian asset.”
— With files from Financial Post staff