Torstar confirms second proposal to purchase company

Unofficial offer is $6M more than bid by Toronto entrepreneurs

The publisher of the Toronto Star confirmed Thursday that it has received a second unsolicited proposal to buy the company, which could potentially set off a bidding war with NordStar Capital, whose previous bid is set to be voted on in less than two weeks.

According to a statement from Toronto Star owner Torstar Corp., the new proposal may constitute a “superior offer” if the bid is made official, but no determination has yet been made. Torstar’s board said it continues to recommend the NordStar bid, calling it “in the best interests of the company.”

The team behind the second bid, which was made public Wednesday evening, includes former Ontario finance minster and provincial Liberal Party president Greg Sorbara.

Sources confirmed to the Star that Sorbara is acting as a “political point man” for the $58million proposal and was brought in roughly 10 days ago.

Matthew Proud, CEO of legal software firm Dye & Durham Corp., and his brother Tyler Proud, CEO of technology company Avesdo Inc., are leading the proposed bid, which offers 72 cents per share, or $6 million more than the 63-cent-pershare offer made by Toronto entrepreneurs Jordan Bitove and Paul Rivett via NordStar.

Sorbara would become chairman of an advisory committee to Torstar if the Proud-led bid is successful, sources said, and is expected to assuage concerns about a potential political shift in the flagship Toronto Star, the country’s largest progressive media voice.

Sorbara did not respond to a request for comment.

Bitove and Rivett’s bid includes former Ontario premier David Peterson, once Sorbara’s boss, playing a similar role.

The original offer is to be voted on by shareholders on July 21. The Torstar board is currently recommending that shareholders vote in favour of the NordStar bid.

The Prouds have until 5 p.m. Friday to submit a formal bid. If they do, NordStar has five business days to respond and potentially match the new offer. If NordStar does match the new bid, it would get priority.

Trading of Torstar shares was halted at 8:35 a.m. Thursday and resumed at 12:55 p.m., after the company issued its statement. After trading resumed, share prices rose from 62 cents, closing at 72 cents at the end of the day.

The share price surge means investors believe the Proud bid is a legitimate one, said Andrey Golubov, a finance professor at the University of Toronto’s Rotman School of Business.

“The fact that the share price has gone up like that even though the offer’s not official yet, means the market in its collective wisdom believes it’s a credible offer,” said Golubov, adding that doesn’t necessarily mean the new bid will win out.

“The first bidders could match it.”

The fact Torstar is debt-free and has a significant amount of cash in the bank makes it a relative rarity, especially among companies in financially troubled industries, Golubov said.

“Having zero debt isn’t usually considered the optimal situation, because you want to have some access to capital. But you also don’t want to pile up too much debt and run the risk of bankruptcy,” Golubov said.

Still, the $69 million the company has in the bank is a tempting target for would-be owners, he added.

“It’s not surprising at all that there are multiple bidders, even in a distressed industry,” said Golubov.

Sources said financial-industry veteran Neil Selfe, who founded Infor Financial Group, is also involved in the offer. Selfe’s firm is an underwriter for the pending IPO of Matthew Proud’s company.

Selfe is a longtime donor to the Ontario PC party and current provincial finance minister Rod Phillips, according to public records.

Bitove and Rivett have also made donations to conservative politicians at both the federal and provincial levels.

Neither of the Prouds nor Selfe responded to requests for comment.

On Wednesday, a spokesperson for Bitove and Rivett said they did not intend to raise their offer at that time.

“Our bid for Torstar fully values the company given the significant expenses that will need to be incurred to ensure the growth and prosperity of the flagship Toronto Star and community newspapers. We informed the company early on that we have no plans to increase our bid.”