Torstar makes $200M bet on digital property
Torstar Corp. surprised Bay Street analysts on Wednesday by announcing it had spent $200 million to acquire a 56-per-cent stake in Vertical-Scope Inc., a Toronto-based company that operates more than 600 digital properties that cover everything from cars to pets to powersports.
Chief executive David Holland said the purchase was how Torstar will spend some of the $455 million it generated from last year’s sale of book publisher Harlequin to News Corp. — and is another bet by the owner of the Toronto Star on the shift of audiences and ad dollars from print to online.
VerticalScope is “our highgrowth opportunity that, frankly, is big enough to make a difference to Torstar moving forward” and diversifies its media operations by giving “exposure to the U.S. economy,” Holland said Wednesday morning during a conference call. “A very large majority of the revenue base is U.S.”
According to statistics referenced by Torstar’s Holland, VerticalScope’s roster of sites attracts a combined total of more than 80 million unique visitors per month and more than 500 million page views. It makes money from selling banner advertising and through sponsored content. It employs 130 people.
Bay Street was less impressed. Torstar posted a second-quarter net loss of $1.1 million, down from net income of $18.1 million during the same period last year. Operating revenue fell to $206.3 million from $225.6 million.
Class B shares of Torstar fell almost 12 per cent to $4.60 in Toronto. The stock has fallen close to 30 per cent this year.
When asked if he knew of VerticalScope or the people behind it, analyst Paul Steep, who covers the media sector for Scotia Capital Inc., said, “No, don’t know anything. No comment.”
An early version of VerticalScope was founded in 1997 by Rob Laidlaw — just 16 at the time — in his parents’ basement in Regina. Over the past 18 years, the company has amassed more than 550 auto websites, including forums categorized by car brand and even car model.