The rival bidder for Torstar Corp. first sought to partner with NordStar Capital LP before launching its own offer, which failed to win the support of the company’s board, a NordStar partner said on Sunday.
Jordan Bitove said Matthew Proud, who has been listed as the head of Canadian Modern Media Inc., inquired about participating on June 8, after NordStar went public with its initial friendly offer.
“He was clearly feeling me out on things and then started making some overtures ... that they wanted to muscle in on 50 per cent of our deal or they were going to launch a bid,” Mr. Bitove said. He and former Fairfax Financial Holdings Ltd. president Paul Rivett are NordStar’s partners.
After discussions over the following days, Mr. Proud’s group declined to sign a non-disclosure agreement that would allow a deeper look into NordStar’s work on the deal. It would have also prevented the Proud group from bidding on its own if a partnership could not be reached. At the end of June, Mr. Proud, along with his brother Tyler Proud and investment banker Neil Selfe, launched their competing bid as Canadian Modern Media.
That kicked off weeks of animosity between the two sides, which continues as an Ontario judge readies a decision on whether to approve NordStar’s sweetened $60-million takeover of Torstar, the final step before the deal is done. The company publishes the Toronto Star as well as other newspapers.
Mr. Bitove said Canadian Modern Media is still sowing confusion about the legitimacy of his group’s offer as the deal awaits court approval following a hearing on Thursday.
Canadian Modern Media has portrayed the bidding process as unfair to shareholders – 98.7 per cent of whom voted in favour of the friendly transaction with NordStar. Last week, the rivals asked Justice Cory Gilmore of the Ontario Superior Court of Justice to not approve the deal.
Their lawyer argued the Torstar board shut down the sale process and prevented all shareholders from getting a richer bid when it allowed NordStar to improve its bid for the second time and lock up support among major investors.
NordStar finalized its offer in mid-July to buy the company for 74 cents a share. As part of that, the families in Torstar’s voting trust, as well as major non-voting stockholder Fairfax, agreed to “hard lockups,” which committed them to the offer.
NordStar had raised its bid from 63 cents after a proposal from Canadian Modern Media. The rival group next sought to float an offer of 80 cents last Monday, a day before shareholders were due to vote on the NordStar deal. The Torstar board ruled it out as unworkable, partly because of the hard lockup agreements.
Mr. Selfe and the Proud brothers declined to comment, citing a nondisclosure agreement with Torstar. Sources close to Canadian Modern Media said the group “categorically denied” that the early discussions played out as Mr. Bitove described. The sources said the rival bidders could give their version of events if Torstar or the court freed them from the legal restriction on commenting. The Globe and Mail has agreed not to name the sources because they are not authorized to speak publicly.
Mr. Bitove said Canadian Modern Media has been trying to muddy the waters surrounding the Torstar’s bidding process because shareholders had already backed the NordStar deal. “They had an opportunity to put in a bid, and they messed up that opportunity and created a lot of, obviously, uncertainty around their bid in the way they handled it, and continue to handle it,” he said.
Mr. Bitove provided a copy of an e-mail that Matthew Proud sent to the NordStar partners on the evening Torstar announced the finalized deal, congratulating them on extracting the lockup agreements. “While we obviously really liked the asset and wanted to own it, congratulations on getting it done. I’m confident you guys will make the business a success and we will be cheering for you from the sidelines,” the e-mail reads. The concession, apparently, was short-lived.
Meanwhile, Torstar chairman John Honderich said the Torstar voting trust canvassed its membership this weekend after The Globe quoted one family member criticizing the deal. No other opposition surfaced, he said.
On Friday, Butch Folland, a member of the Hindmarsh family who has a small fraction of the Class A voting stock, said he did not agree with the controlling trust’s decision to lock in support for NordStar.
“I respect his decision. Disappointed, but I respect his decision,” Mr. Honderich said.
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