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Report on Business Transcontinental defends sale of East Coast newspapers to SaltWire in wake of lawsuit

SaltWire, which owns the Halifax Chronicle Herald – seen above in April, 2017, – bought 28 newspapers and news websites from Transcontinental in April, 2017.

The Canadian Press

Printing, packaging and media company Transcontinental Inc. is fighting allegations that it had misrepresented information about its business in the 2017 sale of its East Coast newspapers.

The Montreal-based company replied on Thursday to a multimillion-dollar lawsuit filed by SaltWire Network Inc. in the Supreme Court of Nova Scotia the previous day. SaltWire, which owns the Halifax Chronicle Herald, bought 28 newspapers and news websites from Transcontinental in April, 2017, giving it an expanded media presence in Nova Scotia, Prince Edward Island, Newfoundland and New Brunswick. It also purchased some printing plants and distribution operations in the region, as well as commercial printing operations in Newfoundland.

“It gives us people on the ground in over 30 communities in Atlantic Canada,” Mark Lever, SaltWire’s president and chief executive, said at the time.

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In the months after the deal, “SaltWire experienced significant problems and substandard performance in relation to many of those assets,” SaltWire claimed in court documents, adding that Transcontinental had made “material misrepresentations” regarding the properties it had sold. SaltWire claimed those misrepresentations included inflating circulation information related to its flyer business; damages from flyers that were never delivered by Transcontinental; and “unrealistic and inflated” earnings figures, digital revenue figures and cost synergy estimates that led to damages including SaltWire overpaying for the properties. SaltWire is seeking compensation for damages, interest and costs.

None of the allegations has been proved in court.

On Thursday, Transcontinental released a statement rejecting SaltWire’s claims, and saying that it is considering a countersuit related to SaltWire’s failure “to fulfill its payment obligations," which Transcontinental claims is a breach of contract.

“We are confident that the sale of our media assets in Atlantic Canada was conducted based on fair, accurate and timely information. We intend to vigorously defend ourselves in court," Transcontinental president and CEO François Olivier said in the statement.

As of October, 2016, Transcontinental said the assets for sale would generate $69.5-million in revenue that year and $12.6-million in EBITDA, according to court documents filed by SaltWire. The company said that Transcontinental also forecast that the deal would yield cost synergies of more than $3.4-million and $3-million in revenue from a targeted advertising tool by 2017.

SaltWire was created in March, 2017, to absorb the Transcontinental assets, and owns a total of 35 newspapers in Atlantic Canada. The deal consolidated media ownership in the region with most news operations owned by SaltWire and by Brunswick News Inc., which is controlled by the New Brunswick-based Irving family. SaltWire is a privately held company owned by Halifax’s Dennis family, longtime owners of the Halifax Chronicle Herald.

The company has been working to shore up the health of its business in recent months. In February, SaltWire announced it would soon put some of the content on its newspaper sites behind a paywall.

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The company “need[s] our audience … to step up and say: ‘Yes, I believe in a vibrant media environment and I’m committed to supporting the work you’re doing,’ ” Mr. Lever wrote in a letter to readers at the time.

The following month, the company announced plans to sell 10 of its buildings, including the headquarters of the Cape Breton Post in Sydney, N.S., and of the Guardian in P.E.I. The company also recently pulled out of the Canadian Press newswire service, opting to pay instead for some content from Postmedia Network Inc. and Reuters.

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