Canadian Consolidation As Southam Goes National p.12

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By: Robert Neuwirth Sun Media exchanges Financial Post and $150 million for four Ontario dailies, as Hollinger invests in national launch, and may remake Post into business section of a new national paper
By robert neuwirth
HE's back. Nine months after he lost a bid to buy the Financial Post and dumped his minority stake in the Canadian financial daily, media baron Conrad Black has returned with a vengeance.
Southam Inc. ? which is controlled by Black's Hollinger Inc. ? has agreed to acquire Sun Media's 80% stake in the Post and intends to make the 91-year-old tabloid the financial flagship of its national newspaper empire. Sun Media is surrendering the Post and $150 million (Canadian) in cash in return for four Ontario dailies.
The deal gives an immediate injection of credibility to Southam's planned October rollout of a new Canadian national newspaper. And it provides Sun Media with a major boost in the lucrative Southern Ontario market.
Paul Godfrey, president and CEO of Toronto-based Sun, said Black's winning offer was much sweeter than his earlier cash bid, which was "very substantially less than this," concluding that Black's thirst for a national paper prompted the increase. "There is no doubt about it," Godfrey said. "I don't think he did it simply because he thinks that Paul Godfrey is such a nice guy."
The tabloid Post publishes Tuesday through Saturday and averages 100,000-circulation daily, 200,000 on the weekend. It reports revenues of approximately $75 million (Canadian) a year.
Analysts valued 80% of the Post at $160 million (Canadian). When he sold his 19.9% holding last year, Black surrendered it for $25 million. The remaining stake is in the hands of U.K.-based Pearson PLC, owner of the Financial Times newspaper and Economist magazine.
For giving up $150 million and control of the Post, Sun Media acquires the Hamilton Spectator, Kitchener-Waterloo Record, Cambridge Reporter and Guelph Daily Mercury. Together they have 200,000-circulation daily and annual revenues of $130 million. "They're not paying anything to us except respect," said Godfrey.
He noted that the four monopoly papers Sun Media is getting generate nearly double what the Post does and operate at "substantially higher" margins, but declined to give specifics.
With the transaction, Sun Media will own 15 of Canada's 105 dailies and a 16% share of the nation's newspaper circulation. Locally, Sun Media will surge past the Toronto Star as the newspaper company with the largest circulation in Southern Ontario. Black's Hollinger Inc. will own 58 Canadian dailies, commanding 40% of the newspaper circulation in the country.
The day the swap was announced, Sun Media's stock rose almost 7% to $15.35. Southam also did well, up 7.5% to $28.75. Both companies are publicly traded on the Toronto exchange.
Buying the Post puts Southam's planned national daily, scheduled for launch in October, in a direct fight with Thomson's Globe and Mail in Toronto.
But the deal fueled questions about the Post's future. While Black has suggested it will remain independent, Kenneth Whyte, editor of the yet-unnamed national daily ? Southam has applied to register the name National Post with Canada's Trademarks Registrar in Ottawa ? claimed that the Post would become the financial section of the new paper, the New York Times reported.
But Bill Neill, publisher and CEO of the tabloid Post, said the decision wasn't written in stone. "The people at Southam came to the conclusion that the Post would make an admirable fourth section of its national paper ? and it would," said Neill, who has been at the paper for 23 years. But the deal came together quickly and many uncertainties remain. Neill expects Southam to decide the Post's future within two weeks.
Neill said the Post's 325 employees were girding for change, whatever it might entail. "In newspapers, of course, we have to embrace change," he observed. "We're like hockey players. We come to play hockey, and every once in a while we get traded."
?(From Sun Media to Southam) [Photo & Caption]
?(Editor & Publisher Web Site: http://www.mediainfo. com) [Caption]
?(copyright: Editor & Publisher July 25,1998) [Caption]

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