With $334 Million Osprey Purchase, Quebecor Becomes Canada's Biggest Chain

By: Mark Fitzgerald When Quebecor Inc.?s C$355.5 million (US$334 million) purchase of community newspaper publisher Osprey Media Income Fund closes next month, the Montreal-based chain known for its Sun tabloids will become Canada?s biggest newspaper company.

The deal -- which is valued at C$517 million (US$485. million) including debt Quebecor is assuming -- prices the units of the Osprey income trust at C$7.25, an approximately 30% premium on its trading price in March when Osprey announced it was ?studying strategic alternatives.?

The transaction multiple based on purchase price is about 9.6 times EBITDA (earnings before income, taxes, deduction, and appreciation).

Osprey is a kind of CNHI (Community Newspaper Holdings Inc.) of Canada. It was created in 2001 from community papers being sold off by Hollinger International during Conrad Black?s era. Like CNHI, Osprey Chairman Michael Sifton got backing from a teachers pension plan, this Ontario?s, plus investment from an arm of the Bank of Nova Scotia.

Like many newspaper chains, Osprey became an income trust in 2004 to take advantage of big tax breaks. Canada is in the process of cutting off those tax advantages, however, spurring several chains to consider their alternatives.

Last year, Osprey reported it lost C$113.4 million (US$105.5 million).

Osprey publishes 20 dailies and 34 weeklies in Ontario. Its dailies include the Kingston Whig-Standard, Pembroke Daily Observer, Cornwall Standard-Freeholder, Belleville Intelligencer, and Peterborough Examiner.

That will make for good synergies, believes Quebecor, which publishes Sun papers in Toronto and Ottawa. Its other Ontario dailies include the Brockville Recorder and Times, and the London Free Press.

With Osprey?s papers, Quebecor will publish 250 papers across Canada.