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Black Press sale would increase American ownership of Canada’s news media

Canadian law supposedly limits foreign ownership of newspapers to 25%

Media Canadian Business

Yet another Canadian community newspaper chain is going to court under our bankruptcy laws, but again it has nothing to do with it going out of business. This time it is more a legal power play to force its sale to largely American interests over the objections of its minority owner. Surrey, BC-based Black Press, which owns 82 newspapers in BC and Alberta plus 55 in Washington, Alaska and Hawai’i, has arranged its sale to a consortium which includes two of its Canadian lenders and the Carpenter Media Group of Tuscaloosa, Alabama. If a petition filed in BC Supreme Court is granted, it could be sold for $14 million to a 50/50 partnership between the US group, which would pay $7 million, and the company’s lenders, which would pay another $1 million in addition to $6 million of what they are owed in a so-called “credit bid.”

That level of foreign ownership should trigger federal alarm, as Canadian law supposedly limits foreign ownership of newspapers to 25 percent, but the country’s largest chain, Postmedia Network, is 98 percent American owned due to a legal loophole. “Under the terms of the Transaction, the Company will continue to be Canadian-controlled,” noted a press release issued by Black Press. Postmedia also claims to be Canadian-controlled because it is a publicly-traded company that issues two types of stock, with variable-voting shares held by foreign owners to keep their control under the limit.

The complicated transaction proposed by Black Press is outlined in a 1,293-page court filing and is set to be heard by a judge next week. It involves an intriguing backstory which includes the minority owner of Black Press apparently balking at the move to seek court-ordered protection from its creditors, thus requiring the court action. The minority owner is Ontario community newspaper chain Metroland Media, which owns 19.35 percent of Black Press. It ironically went to court last year in Ontario under the same Companies’ Creditors Arrangement Act to stiff 605 of its laid-off workers out of their severance pay. The court filing notes that under the ownership agreement for Black Press, Metroland must consent to any insolvency proceedings. “Metroland was made aware of the Petitioners’ intention to commence these CCAA proceedings, and as noted below was provided an opportunity to provide the Petitioners with interim financing or alternative restructuring proposals but did not do so.”

The documents also reveal details of Black Press finances for the first time, as it is a privately-held company that does not have to report them publicly. For years, the only way to infer the company’s profits was through the annual reports of Metroland owner Torstar Corp., but it was bought by private equity firm NordStar Capital in 2020 and de-listed from the Toronto Stock Exchange. Black Press remains profitable despite the recent woes experienced by the beleaguered newspaper industry, which keeps losing more and more advertising to Google and Facebook. The company’s revenues actually increased 2.3 percent to $243 million in its last fiscal year ended February 20, 2023, but its earnings fell 15.2 percent to $24 million, for a profit margin of 9.85 percent. Its results for the nine months ending last November 30 were not as good, with revenues down 7.7 percent from the same period a year earlier and earnings down sharply to only $3.2 million, which against its interest payments of $4.4 million put it officially under water and thus eligible to apply for court-ordered protection from its creditors.

The documents also show that the company has received government subsidies of more than $14 million in each of its last two fiscal years, including the Canada Emergency Wage Subsidy, which all businesses could claim under the pandemic, the 2019 Journalism Labour Tax Credit, which was part of a $595 million news media bailout package, the Aid to Publishers program under the Canada Periodical Fund, and the 2023 Special Measures for Journalism Grant. The company, which employs 717 workers in Canada and 506 in the US, also received more than $10 million last year under the US Employee Retention Tax Credit program.

If the court approves the petition, the group including Carpenter Media and Canadian debt holders Canso Investment Counsel of Richmond Hill, Ontario, and asset management firm Deans Knight of Vancouver would be allowed to make a so-called “stalking horse bid” for Black Press of $14 million. In the same way that the US hedge funds acquired Postmedia out of the 2009 bankruptcy of Canwest Global Communications, that bid could then be beaten by higher offers made during a court-ordered auction of the company. Canso has been a major lender to Canadian newspaper companies, including both Postmedia and NordStar, which prompted speculation in 2020 that the country’s two largest chains would be merged. The companies denied the rumours, but Postmedia announced last year as a result of unusual trading in its shares that merger talks were ongoing and had also taken place in 2020. The talks eventually broke off after an agreement reportedly could not be reached on how much of Postmedia’s debt, which is held mostly by its US hedge fund owners, would be kept on the combined company’s books. Canso will also provide interim financing to keep Black Press going after the CIBC bank stopped its credit.

Black Press founder David Black, who turns 78 in April, started the chain in 1975 when he bought a newspaper in tiny Williams Lake, BC, from his father for $60,000 and steadily built it into the largest in the Pacific Northwest. He began buying US newspapers in 1987 and in 2001 bought the daily Honolulu Star-Bulletin, to which he added the competing Honolulu Advertiser in 2010, merging them as the Honolulu Star-Advertiser. His 2006 purchase of the Akron Beacon Journal in Ohio for US$165 million proved disastrous, however, as the subsequent recession dropped advertising revenues sharply and they have never recovered. Black Press sold the Beacon for only US$16 million in 2018 and has struggled ever since to manage the debt it took on in making such expensive acquisitions. “Since 2016, the Company has sold real property for amounts in excess of $45 million and cut over $30 million of annualized costs,” states the court filing.

Black’s ownership of newspapers has provoked controversy over the years. He ordered his BC titles in 1998 to run editorials opposing the Nisga’a treaty that ceded 2,000 square kilometres of the northern Nass River Valley to settle a long-standing Indigenous land claim. The NDP government launched a complaint to the BC Press Council that was dismissed after Black testified that he did so because he felt a government publicity campaign in support of the treaty was too one-sided. In a case that drew international attention, the editor of his weekly Victoria News was fired in 2007 after a complaint from a car dealer advertiser over a story about bargains to be had across the border in the US. Black Press has also engaged in blatantly anti-competitive dealings with Vancouver-based Glacier Media, buying and selling several dozen community newspapers across BC since 2010 and then closing most of them to create local monopolies.

The Carpenter Media Group split late last year from long-time partner Boone Newsmedia. It owns 28 newspapers across the US south, including titles such as the Bowling Green Daily News in Kentucky, the Port Arthur News in Texas and the Poplarville Democrat in Mississippi.

Marc Edge is a journalism researcher and author who lives in Ladysmith, BC. His books and articles can be found online at www.marcedge.com.

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