Torstar sold for $52 million — will entrepreneurs fix its business model?

The Toronto Star’s new prospective owners, Jordan Bitove, left, and Paul Rivett (photo: Nordstar Capital)

Since news broke late Tuesday that the Toronto Star’s parent company had agreed to a sale to a pair of investors for the equivalent of $52 million, lots of people have been looking at the political angle, convinced that either:

(a) because the new owners had made donations to Conservative parties (including Maxime Bernier’s leadership campaign), Toronto’s last left-wing paper would become a right-wing one like the rest; or

(b) because they had tipped former Ontario Liberal premier David Peterson as its vice-chair, the paper would become more entrenched as the Red Star so-liberal-its-actually-communist propaganda machine.

In reality, neither is true. In the short term, at least, the Star (and its other newspapers, the Hamilton Spectator, the Waterloo Region Record, the St. Catharines Standard, the Niagara Falls Review, the Welland Tribune, the Peterborough Examiner, Sing Tao and all of the Metroland community papers) will stay the same. The last thing a new investor wants to do is scare off a loyal customer base.

That’s not to say that political allegiances, whether real or imagined, aren’t a problem. It’s uncomfortable, not to mention demoralizing, when journalists are told they can’t participate in protests or express controversial opinions when their bosses openly donate money to political parties and/or used to work for them.

But more important than ensuring its apparent impartiality is ensuring its survival. Torstar as a whole was sold for $52 million. Its 63-cent buyout offer is a premium on its current share price, but a tiny fraction of Torstar’s value before the internet hacked away at its business model. In 2003, Torstar was worth up to $30 a share.

By comparison, Postmedia bought out the Canwest newspapers in 2010 for $1.1 billion, out of bankruptcy protection. Postmedia bought Sun Media in 2015 for $316 million. TVA bought Transcontinental’s 14 magazines for $55.5 million in 2015. Two years earlier, Quebecor sold 74 community newspapers to Transcontinental for $75 million. In 2007, Quebecor’s Sun Media bought Osprey Media (20 dailies and 34 weeklies) for $575 million.

Is Torstar really worth less than all of these? Unfortunately, yes. Because the newspaper business model has collapsed, especially over the past 15 years.

Nordstar’s Jordan Bitove, whose family helped found the Toronto Raptors, started Mobilicity and owns a third of SiriusXM Canada, and Paul Rivett, former president of Fairfax Financial Holdings, haven’t presented a plan for Torstar. Instead, they have focused on what they’re not doing to do. They’re not going to clean house in senior management (CEO John Boynton is staying on). They’re not going to drastically cut costs. And they’re not going to abandon the famous Atkinson principles the paper lives by.

Instead, they talk about “patient capital” and “long-term viability”. They claim they’re willing to sink a lot of money into this company to keep its journalism going while they figure out how to make it profitable.

That must be a sigh of relief for Torstar employees, who don’t have to worry about layoffs for a bit.

The hope is that Nordstar will do to the Star family what Jeff Bezos did for the Washington Post: Sink a bunch of money into it and not care about making a profit for a while.

The worry is that Bitove and Rivett are either (a) lying about their intentions and are more interested in the Star’s real estate than the newspaper, or (b) will make a series of poor business decisions and eventually bail when they get tired of losing money.

With the loss of ad revenue, most of which is never coming back, newspapers need a new business model. They can’t live off classified ads like they used to. People don’t need to subscribe to get their news, opinions, movie listings, comics, puzzles, event listings and all the other publishing knick-knacks that newspapers accumulated over the 20th century.

Are Bitove and Rivett the guys who can transform this business, which first requires figuring out what to transform it into? Nothing about their biographies or statements suggests to me that they are. But if they limit their roles to being sugar daddies and hire people who are willing and able to innovate well, they might be the best thing that’s ever happened to the newspaper, and maybe even the industry.

But it’s very easy to lose a lot of money in this business (as the Star demonstrated with its ill-fated StarTouch tablet app), and though the new owners are wealthy, their wealth is not infinite.

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3 thoughts on “Torstar sold for $52 million — will entrepreneurs fix its business model?

  1. Ved Singal

    Thank you very much for your insight into the possibilities that may or may not happen to TorStar down the line. Time would tell which way the wind blows. I have been Toronto Star reader since 1975. I liked its coverage of world, local, auto, and sports news. Business section used to be very good. In its present form, the Toronto Star have lost most of its meat of previous century. I still love to have hard copy in the morning with a cup of coffee. In depth articles by Cohn, Walkom, and DiManno is a treat for the brain. My sincere hope that the paper survives and come out as a good business model. My heart is with all the present staff of the newspaper and hope they would stay connected with many more years to come.

  2. Dorothy

    $52-million? If the business model has collapsed, then why buy Torstar at all?
    David Peterson, the former Ontario Liberal premier brought in now to be vice-chair of the Toronto Star, noted that the Star has been “a voice” for those without one.
    Well, everyone now has a voice, thanks to social media. And that voice can be heard not just in Toronto but just about anywhere in the world.

  3. Dilbert

    There are a bunch of different things at play here, let’s look at the financial side of things:

    The price they paid is pretty much the same as the cash and cash equivalents on hand. Torstar is said to have had no debt, and a positive (but rapidly shrinking) cash on hand situation. It would appear that they got everything else in the deal for nothing.

    Torstar has been selling assets such as Harlequin romance novels and others (including a stake in CTV Globemedia) over the years to pay to keep the papers running. A number of high dollar acquisitions that fizzled seems to have been management flailing around looking for an exit from print hell.

    Physically, they have gone through most of the steps to sell physical property assets as well, which has all gone in to paying for the burn rate. I am assuming there are still some physical assets left, but I am thinking most of them are long since sold.

    The brands themselves have some value, but not as much as you might think. The stake in Blue Ant Media might be of some longer term value.

    There is no indication if this purchase is straight cash or just a leveraged buyout.

    Then the political side of things:

    It’s well known that conservative / right wing groups are attracted to trying to control the message by controlling the delivery. Conservatives generally dominate talk radio and a big chunk of the online space as well. Controlling news sources in print, TV, and radio is generally important in their political process. It’s quite possible that the patient money is mostly political money thinking it’s cheaper to buy the cow than pay for milk.

    End result:

    My guess is that they will try to spin out anything of value, either by selling to others or by creating other holding companies that can be taken public at some future date. It’s more likely they will group up the newspapers into one structure that can easily be flushed at some point if things don’t get better and they don’t meet their political ends.


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