Exteriors of 1 Yonge St., long time home of the Toronto Star newspaper, are photographed on May 27 2020.
Fred Lum/the Globe and Mail
A spurned rival bidder has applied to appeal a judge’s decision approving NordStar Capital LP’s $60-million takeover of Torstar Corp., which is due to close on Thursday.
An Ontario judge late on Monday approved NordStar’s acquisition of the company that publishes the Toronto Star and other newspapers, dismissing all of the arguments against it from competing bidder Canadian Modern Media Holdings Inc. and a shareholder and former Torstar executive, Patrick Collins.
CMMH, whose principals include technology entrepreneurs Matthew Proud and his brother Tyler Proud, as well as Bay Street investment banker Neil Selfe, has filed materials seeking a stay of the decision and leave to appeal, with the goal of preventing the transaction from closing. The deal is “neither fair nor reasonable,” the group said in a statement.
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It had argued that NordStar’s transaction, which won support last week from a large majority of shareholders, was unfair to investors because they were unable to consider a higher offer from CMMH. It also said the nondisclosure agreements they were subject to prevented the details from being made public.
But in her ruling, Ontario Superior Court Justice Cory Gilmore said CMMH’s last bid, though higher than the 74 cents a share that NordStar is offering, came well after NordStar had locked up commitments from Torstar’s major shareholder and the five families that control its voting trust. “The second bid was certainly superior from a cash perspective but, as described above, could not have been considered because it was just too late in the process,” Justice Gilmore wrote.
With the approval in hand, Torstar said it intends to complete the transaction with NordStar – a holding company controlled by investors Jordan Bitove and Paul Rivett – on July 30. But what has proved to be an acrimonious battle for the struggling company is not quite over.
In its appeal materials, CMMH says it believes the judge made “palpable and overriding factual errors” in her decision, partly because it was rushed; the group had just 15 minutes to present its case at a hearing on Thursday. It described that as “procedurally unfair.”
The competing bidder also said that if it is not granted a stay, it will suffer irreparable harm because the deal will close and its arguments will be moot. CMMH asserted that NordStar’s offer remains valid as long as it is completed by the end of September, suggesting there is time to argue an appeal.
The latest legal challenge constitutes “mischief and intentional obstruction by bitter bidders,” NordStar’s Mr. Bitove said in a statement. “We look forward to the day when we can refocus on the task at hand.”
Torstar chairman John Honderich said the company and its shareholders will be harmed if delays persist. He noted the judge called the deal fair and reasonable, and also pointed out shareholders had voted 98.7 per cent in favour. “It’s no secret that this is a very tough business and this whole process has taken a long time. It’s very important for the new owners to come in and get going,” he said.
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NordStar’s partners have said they plan to accelerate Torstar’s efforts to transition to a digital business model as it tries to counteract a years-long drop in print advertising, which has led to chronic financial losses.
Poonam Puri, a law professor at York University’s Osgoode Hall in Toronto, said an appeals court will only overrule a judge’s decision approving a takeover arrangement if it can be proved the judge had made palpable errors in applying the law.
“Canadian corporate law gives directors the discretion to go with the slightly lower price if they deem that, in light of all the other relevant factors, it’s in the best interests of the corporation,” Prof. Puri said.
In this case, Justice Gilmore noted that Torstar’s board had told CMMH to come up with a higher cash bid after it had floated its first proposal of 72 cents a share, plus a right to contingent payments from future asset sales. She said it did not do so before NordStar raised its offer and locked up support from the major shareholders. It was after that when CMMH submitted a bid of 80 cents a share.
Meanwhile, the deal’s other critic, Mr. Collins, is reviewing the judge’s decision and is examining his options, his lawyer Joe Groia said.
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