Postmedia closes deal to buy Sun publications

Sale of 173 publications for $316M sets media precedent, expert says

TORONTO — Postmedia Network Canada Corp. sealed its $316-million deal to buy 173 Sun Media publications on Monday, creating the largest digital news and newspaper organization in Canada.

The closing of the acquisition is the last hurdle in Postmedia’s bid to acquire Sun Media’s Englishlanguage properties, which include dailies in major Canadian cities such as Toronto, Calgary, Edmonton, Ottawa and Winnipeg, and 24 Hours in Vancouver.

The deal brings in 2,500 more employees into Postmedia, increasing its total head count to more than 5,000.

“With the completion of this transaction Postmedia becomes one of Canada’s largest newsmedia companies with even more compelling, made-in-Canada offerings for marketers,” said Paul Godfrey, chief executive of Postmedia.

The deal to buy the Sun Media newspapers from Quebecor Inc. was originally announced in October. At the time, the deal involved 175 Sun Media newspapers, but one community newspaper has since closed and two publications in Fort McMurray were consolidated. The acquisition gained regulatory approval from the Competition Bureau last month.

Ambarish Chandra, a professor at the University of Toronto’s Rotman School of Management who has written academic studies on newspaper mergers, said the closing and approval of the deal sets an important precedent in Canada.

“It is clear consolidation, especially in traditional media like newspapers, is necessary if some of these publications want to remain sustainable,” he said. “Now if other media properties want to seek such large mergers in the future, there’s already been precedent set. It’s clear the Competition Bureau doesn’t see a problem, so future consolidation shouldn’t be problematic.”

The deal creates an organization that brings in 12 million unique monthly visitors to its various news websites, while also creating a new source of revenue that could potentially help Postmedia become more profitable.

The company pointed out that based on last year’s earnings, the Sun Media properties will bring in $175 million in new annual revenue. Godfrey has said the company expects annualized cost synergies in the range of $6 million to $10 million from the deal, though he stressed the newsrooms would remain separate.