2 of Canada’s Biggest Newspaper Chains to Merge

A merger of two of Canada’s biggest newspaper chains, announced Wednesday, will create a new media powerhouse that challenges press baron Conrad Black’s grip on the national newspaper market.

Montreal-based Quebecor Inc., which runs the largest-circulation French-language paper in the country, surprised the market Wednesday with a $983-million agreement to buy Canada’s second-largest newspaper group, Sun Media Corp.

The deal thwarts a hostile $900-million takeover bid for Sun Media by Torstar Corp., the parent company of Canada’s largest circulation daily newspaper, the Toronto Star.

It also raises the stakes in Canada’s intensifying newspaper wars.

“Torstar has one paper, and that one paper is in Toronto. They wanted to be a national newspaper chain by acquiring us,” Sun Media President and Chief Executive Paul Godfrey told reporters in the atrium of the chain’s flagship Toronto Sun newspaper. “We wanted to be a national newspaper chain as well. And when you look at Quebecor’s daily newspapers, they’re in Winnipeg, Montreal, Quebec City and Sherbrooke. We’re not in any of those cities.”

The merged group would control 25.4% of the daily newspaper circulation in Canada, second to the combined 40.7% held by the Hollinger Inc. and Southam Inc. papers. Both chains are controlled by Conrad Black, whose empire includes the Chicago Sun-Times, the Telegraph in Britain and the Jerusalem Post.

The merged Quebecor-Sun Media chain would own dailies in 10 of the top 11 markets in Canada with 7.8 million copies sold each week.

Holders of 34% of Sun Media shares have already “irrevocably” tendered to Quebecor’s all-cash $21-per-share offer. Quebecor will also assume $345 million in Sun Media net debt.

Sun stock surged $2.20 to close at $21 on Wednesday as more than 3.85 million shares changed hands on the Toronto Stock Exchange. It was the second most actively traded issue. Quebecor stock dipped 10 cents to close at $31.65 in very light volume.

Quebecor bid for the Sun Media chain two years ago and failed. This time, it contacted Sun Media management a day before Torstar made its original $748-million offer for Sun Media on Oct. 28, Quebecor Vice Chairman Pierre Karl Peladeau told reporters.

Under the deal, Quebecor will combine the assets of Sun Media with its own newspapers in a new publishing company. The joining of the two dashes the Toronto Star’s hopes of building a constellation of Canadian newspapers. Torstar executives were not immediately available for comment.