Earlier this year, billionaire hedge-fund manager Leon Cooperman asked Paul Godfrey the question many are wondering: Why does an executive who is nearly 80 years old continue to run a debt-heavy public company that cries out for reinvention?
Mr. Cooperman has been snapping up shares in Postmedia Network Canada Corp. and now owns 14 per cent of the company that publishes the National Post, Calgary Herald, Ottawa Citizen and other digital and print publications across the country. It’s a contrarian bet for Mr. Cooperman, who founded New York-based hedge fund Omega Advisors and is the former head of Goldman Sachs’s asset-management business.
Postmedia is the latest incarnation of the former Southam newspaper chain that changed hands for $3.2-billion a generation ago. In Mr. Godfrey’s eight years at the helm, the company has been through a series of bruising restructurings as it copes with an audience that’s moving from newsprint to smartphones and an ongoing decline in traditional advertising-based revenue. Postmedia shares have bumped along at $1 levels for the past two years, which translates into a market capitalization of about $110-million.
That’s because the market has little faith there will be much left for equity-holders: The company has $266-million in long-term debt – the bulk of it comes due between 2021 and 2023 – and a business model that is slowly melting. Revenue dropped another 10 per cent in the fiscal year that ended Oct. 31 and the company took an $8.7-million operating loss. Seventy-eight per cent of revenue still comes from print advertising and circulation.
The stock rarely trades and there’s little analyst coverage from Bay Street, which leaves plenty of air time for investors such as Mr. Cooperman on the quarterly conference calls. During one, Mr. Cooperman lobbed what he called a “philosophical question” at Mr. Godfrey. “We both have a limited time left on this Earth,” the 75-year-old began, signalling this query was going to be something other than the typical question on free cash flow. He continued: “Neither of us want to spend it without being very productive.
“Are you confident, whenever you look at the company, that there’s value to be created and that we’ll look back several years from now and you [will] have created value that people don’t apparently see at the present time?” Mr. Cooperman asked.
In response, Mr. Godfrey joked, “May we both live to 120," then expressed his confidence in the company’s strategy for “transforming a legacy business, which is big on print, into a digital world.”
Mr. Cooperman began investing in Postmedia on the advice of friends at New Jersey-based Chatham Asset Management LLC, which owns 66 per cent of the Toronto-based company’s shares. (All this American investment means Postmedia must use a dual-class share structure to stay onside the newspaper industry’s foreign-ownership limits.) Mr. Cooperman and Chatham are also co-investors in American Media Inc., parent of the National Enquirer.
While Mr. Cooperman declined this week to elaborate on his remarks, sources familiar with his thinking say he is growing increasingly frustrated with Postmedia’s performance on Mr. Godfrey’s watch and a desire to see second-in-command Andrew MacLeod take the reins and speed up the company’s move into digital media. Mr. MacLeod worked at BlackBerry before joining Postmedia in 2014; when he was named president in 2017, the company said the promotion “formalizes a clear succession plan.”
Mr. Cooperman invested in Postmedia on the theory that the company could play a leading role in consolidating Canadian media platforms, something that might be easier to accomplish under the next generation of leaders. Mr. Godfrey has famously feuded with executives at rival Torstar Corp. over the years. Last week, Postmedia and Torstar made headlines together for all the wrong reasons, as the federal Competition Bureau pressed forward with an inquiry into last year’s swap of smaller newspapers between the two companies – a deal that led to most of those papers being shut down.
Mr. Godfrey has said on many occasions that the word retirement is not in his family dictionary, and he clearly relishes an executive role that keeps him in the public eye. His former boss, Rogers Communications Inc. vice-chair Phil Lind, offered up his insights into those survival skills in a recently published book, called Right Hand Man.
“Few are better political operatives than Paul,” wrote Mr. Lind, and he didn’t mean it as a compliment.
Mr. Godfrey once ran the Toronto Blue Jays, which Rogers owns, and Mr. Lind helped hire him. Mr. Lind recounts that after Mr. Godfrey had run the Blue Jays for seven years, and the team consistently missed the playoffs, Ted Rogers decided it was time for a change at the top. Mr. Lind and former Rogers executive Tony Viner were sent to deliver the news. Mr. Godfrey successfully negotiated one more year with the baseball team. At the end of that year, he pleaded for more time, and – when realizing the gig was finished – he asked for a meeting with Mr. Rogers, purportedly to say thanks.
Mr. Lind wrote: “As soon as he walked through Ted’s office door he started trashing both Tony Viner and me, asking Ted to keep him … as soon as Ted ended the meeting he came over to my office in a fury. He started swearing at me, calling me a[n] … idiot for letting Godfrey into his office.”
Mr. Cooperman highlighted Mr. Godfrey’s “outstanding reputation” when he waxed philosophical on the Postmedia conference call. Mr. Godfrey has indeed had a remarkable career in business, sports and politics. Burnishing that reputation also means knowing when it’s time to leave the stage.