Ontario Liberal heavyweight Greg Sorbara is part of a new bid to buy Torstar Corp., The Globe and Mail has learned.
Torstar‘s B shares jumped 16 per cent Thursday after the company confirmed a Globe and Mail report that the owner of The Toronto Star had received a takeover offer valued higher than its friendly deal struck with NordStar Capital LP in May.
Torstar said in a release it had received “a non-binding unsolicited offer” from an unnamed private investor group and that it was in discussions and negotiations that “may reasonably be expected to constitute or lead to a ‘superior proposal’” compared with the 63-cent-a-share deal with NordStar, backed by Toronto business leaders Jordan Bitove and Paul Rivett.
The release came at the request of the Investment Industry Regulatory Organization of Canada after it halted trading in the B shares Thursday following publication of The Globe story.
The story said Toronto technology entrepreneurs and brothers Matthew and Tyler Proud, along with veteran Bay Street investment banker Neil Selfe, had proposed to offer 72 cents a share, or $58-million in total, for Torstar’s outstanding shares. After trading resumed Thursday, the share price climbed 16 per cent to close at 72 cents apiece, the same price cited in The Globe story.
Tyler Proud is believed to be leading the effort with Mr. Selfe, as Matthew Proud, chief executive officer of legal technology company Dye & Durham Corp., focuses on taking that company public. Tyler Proud is former chair of Dye & Durham and now leads another technology firm.
On Thursday, The Globe learned that Mr. Sorbara, who held several cabinet positions under Liberal premiers David Peterson and Dalton McGuinty, is part of the new group and would serve as chairman of an advisory committee to Torstar if the bid succeeds. His participation is seen as a way to establish the political bona fides of the new group to buy the Star, long seen as a Liberal friendly paper. Mr. Sorbara’s former boss, Mr. Peterson, is part of the NordStar bid and would serve as vice-chairman of the Toronto Star if that bid succeeds.
Mr. Sorbara declined to comment.
The new offer, presented in late June to the Torstar board, is not yet a formal bid, and is conditional on completing due diligence, negotiating definitive documentation and entering into voting support agreements with the trustees representing the five families that make up the Torstar voting trust, the company’s directors and a subsidiary of Fairfax Financial Holdings. Fairfax owns 40 per cent of Torstar’s B shares. A formal offer is expected by week’s end.
Matthew Proud and Mr. Selfe declined to comment.
For now, the Torstar board continues to recommend shareholders vote for the NordStar transaction at a meeting July 21 after it received the blessing of directors and the majority of the Class A voting shares held in a trust for the Honderich, Hindmarsh, Campbell and Thall families, as well as the family of late Toronto Star publisher Joseph Atkinson. It also has the backing of Fairfax.
The deal is also subject to a $3.5-million break fee that would be payable to NordStar if Torstar backs out.
Torstar left the door open to rival bids after the special committee and the families refused to agree to a deal with NordStar if it included a “hard lockup agreement” that would have committed Fairfax’s support to its offer. NordStar has the right to match a competing offer within five business days under its deal.
A NordStar spokesman told The Globe on Wednesday it informed Torstar weeks ago it had no plans to increase its bid, which is being financed by Canso Investment Counsel Ltd., a lender to competing newspaper publisher Postmedia Network Canada Corp. On Thursday, the spokesman said the group stood by its assertion that the bid gives full value to Torstar, given the expenses needed to bring “growth and prosperity” to the company’s media properties.
The upstart suitors are believed to be attracted partly by the company’s balance sheet, which includes about $70-million in cash, some non-core assets believed to be worth about $100-million and no bank debt.
While that suggests Torstar’s stock is undervalued, the company’s core media operation, which also publishes daily newspapers in the Ontario cities of Hamilton, Waterloo and St. Catharines, has lost money for years amid a steep, industrywide drop in advertising revenue. The company has also struggled to make a profitable shift to a digital business model.
Torstar has spent years selling assets, closing newspapers and cutting staff. Business conditions worsened when the COVID-19 pandemic hit.
Mr. Bitove is an entrepreneur whose family is best known for establishing the NBA’s Raptors in Toronto. Mr. Rivett recently retired as president of Fairfax.
After they announced their deal to take Torstar private, the NordStar executives said they plan to accelerate the push to make the company a digital news and information provider. They also committed to maintaining the Star’s progressive editorial principles, seen as key to the five families that have long held a controlling stake.
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Sean Silcoff
Jeffrey Jones