Torstar Corp. has agreed to buy the assets of Olifas Marketing Group Inc., a recycling container distributor that was linked last year to a Montreal crime family -- a link denied by both the alleged mobsters and the company.
Also known as OMG Media, the company provides recycling boxes to cities such as Toronto, Montreal and Ottawa in exchange for the right to advertise on the containers and the promise to return some of the advertising revenue to the local governments.
Torstar announced yesterday it has signed a letter of intent to purchase OMG's assets, a sale that is expected to be completed and approved by both companies in the third quarter of 2003.
It comes after a year of allegations of mob connections that have been denied by all parties involved.
In May 2000, Vince Rizzuto, referred to in court documents as "the godfather of the Italian mafia in Montreal," was charged with refusing a breath-analysis test after being pulled over in a Jeep Grand Cherokee registered to OMG.
Nine months later, Michael Strizzi, an executive with OMG in Quebec who has known the alleged mobster for many years, said he had lent his friend the vehicle a month or two before Mr. Rizzuto was stopped by the police.
Mr. Strizzi apologized to OMG founder Salvatore Oliveti for his lack of judgment and resigned.
Mr. Oliveti admitted knowing Mr. Rizzuto himself but said the reputed crime boss had nothing to do with his business, and suggested that the links had been made because he is Italian and speaks with an Italian accent.
Mr. Strizzi was out of town yesterday and unavailable for comment.
Nor did Torstar return phone calls to explain why it would want to acquire OMG.
Laurence Cashin, an equity analyst at investment dealer Odlum Brown Ltd. in Vancouver, said the OMG Media purchase appears to be a "minor acquisition" that doesn't particularly mesh with Torstar's other businesses.
"If there are synergies with their existing business, I don't know what they are," he said.
Aside from its ownership of the Toronto Star and three other area daily newspapers, Torstar owns more than 60 community newspapers in Southern Ontario, as well as Harlequin Enterprises, which publishes fiction.
Mr. Cashin described Torstar as a "steady cash-flow machine," and said he does not see the OMG investment as big enough to have any major impact on the firm.
If the OMG deal were expected to materially add to Torstar's earnings or revenues, the company would have revealed more details about the transactions, including the purchase price, he said.
Since being pulled over in the OMG vehicle last year, Mr. Rizzuto has said he has no ties to the company or its founder. But, despite the denials, the cities that signed contracts with OMG have been forced to defend their dealings with the company.
In Ottawa, the city's chief lawyer told councillors that a search had found no connection between Mr. Rizzuto and OMG.
In Toronto, the company has been embroiled in constant disputes with the city over payments.
Last year, OMG stopped giving money to the city, claiming city work crews had caused almost $300,000 in damage to its bins. The city agreed to abandon $150,000 of the money owed by OMG in return for an agreement from the company to repay the balance over the course of a year.