Transcontinental Inc. and Sun Media Corp. must put 34 weekly community newspapers up for sale to safeguard competition for advertising sales in local Quebec markets, after Transcontinental agreed to buy 74 papers from its publishing rival late last year.
The Competition Bureau set the requirement as a condition of approving the larger deal, announcing a consent agreement with Transcontinental on Wednesday. The 34 newspapers, some of which are part of the previous sale, will be offered for sale for 60 days by an independent party with no minimum price.
At the time of the $75-million December sale, consolidation appeared a likely option in cities where the two companies competed for advertising, but the consent agreement leaves that prospect uncertain. In any regional market where the bureau deemed that competition would be seriously harmed, at least one newspaper must be made available.
The 60-day sale period is designed to "market-test" whether buyers could be found for each of the 34 papers and, if not, Transcontinental will be allowed to retain ownership. If some are sold, Transcontinental must also provide printing and distribution services to buyers for a time to ensure the papers are sustainable.
"This proposed sale process aims to preserve competition by providing the opportunity for a third-party to purchase and operate the newspapers independently, to the benefit of both readers and advertisers," the Competition Bureau said in a statement.
Chartered accountants Mallette LLP will handle the sale processes for newspapers including the Abitibi Express and eight local L'Écho titles in communities such as Laval and Trois-Rivières. A dozen are owned by Transcontinental and the other 22 by Sun Media, which is controlled by parent company Quebecor Inc.
On Wednesday, president and CEO François Olivier said in a statement he is pleased with the agreement. "Despite having to put some weekly newspapers up for sale, this transaction will add about $20-million to the operating earnings before amortization of Transcontinental Inc. and further advance the local multiplatform offering for businesses and communities," he said.
Analysts reacted positively, expecting Sun Media to use proceeds from the sale to pay down debt. "We believe that divesting from what we consider a legacy asset is a strategic positive and we hope to see further newspaper sales from [Quebecor Media Inc.]," Canaccord Genuity analyst Dvai Ghose said in a note.
The deal transferring 74 newspapers to Transcontinental is expected to close in the coming days.