Postmedia is paying $16.1-million for Brunswick News Inc.Fred Lum/Globe and Mail
The Irving family is selling the entirety of its media arm to Postmedia Network Canada Corp. in exchange for cash and shares, marking a sharp exit from a business it spent decades assembling.
Postmedia, the largest owner of newspapers in Canada with more than 100 titles including the National Post, is paying $16.1-million for Brunswick News Inc. – $7.5-million in cash and $8.6-million in variable voting shares that have limited voting power.
At the same time, Postmedia is reworking its heavy debt burden once again by extending the repayment dates on $255-million worth of debt. The company’s two debt tranches will now both mature in 2027. As part of the deal, holders of Postmedia’s senior-ranking debt will receive 794,630 variable voting shares. Postmedia’s debt was previously refinanced in 2019.
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Based in Saint John, the Irving family is one of Canada’s richest and owns an industrial empire that spans sectors including forestry, oil and shipbuilding. The media division, Brunswick, was largely assembled by K.C. Irving, and its prized asset was the New Brunswick Telegraph-Journal, a provincial paper once seen as a force in Canadian journalism.
Local papers that lack national scale have struggled for years to remain relevant, and the Telegraph-Journal is no exception. “It was certainly a paper that people read and people noticed,” said Philip Lee, a journalism professor at St. Thomas University in Fredericton, who has worked for the Irving media business. “It hasn’t felt that way for a long time.”
Brunswick News also owns local newspapers including The Daily Gleaner, the Bathurst Northern Light, and the Campbellton Tribune. Historically, local papers were hot assets to own because advertisers had few options for micro-targeting small populations. However, once-popular revenue sources such as classified ads and hyperlocal print advertising have been displaced by the internet and social media.
To adjust, the Telegraph-Journal was put behind a hard paywall about a decade ago, which meant that only paying subscribers could read the stories. Brunswick News also launched a parcel delivery business in recent years – the assumption being that drivers delivering print newspapers were already canvassing the community, so they could add parcels to their delivery routes.
Postmedia declined to comment, but in a news release, chief executive officer Andrew MacLeod said the deal expands Postmedia’s national coverage – which may help the company sell ads – and expands the network for a parcel delivery business it is trying to build.
NordStar Capital, the new owners of the Toronto Star, have also bet on parcel delivery.
The Irving family did not return a request for comment, but in a news release, Jim Irving made clear that the sale “represents an exit from the media business by J.D. Irving, Ltd.,” which is the family’s holding company. Mr. Irving is the company’s co-CEO. He also noted that Postmedia “is well positioned to make the transition to the digital world.”
Postmedia’s senior debt is currently rated B3 by Moody’s Investors Service, far below investment grade, and its corporate family rating, which incorporates all debt, is Caa3, deep in junk debt territory. In April, 2021, Moody’s cited refinancing risk as a major concern – something that will be alleviated by the latest maturity extension.
However, Moody’s also noted continuing structural problems, including “steep, sustained revenue declines in its traditional newspaper business” and intense competition in digital media.
Postmedia reported a $34-million profit in fiscal 2021, which ended Aug. 31. However, that time period included a $63-million non-cash gain tied to a change in its pension plan. In the first quarter of fiscal 2022, the company lost $4.4-million, but its operating income before interest payments and non-cash items was $11.9-million.
Postmedia pays about $30-million in debt interest payments each year.
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