Memos: Postmedia strikes $316M deal to buy Sun Media English papers

Associate Editor Tamara Baluja has obtained memos sent by Postmedia Network and Sun Media to their respective employees.

CEO Paul Godfrey notes that Postmedia Network has agreed to buy 175 English language publications from Sun Media. 

Today we announced perhaps the biggest news in the Canadian news media industry since the day Postmedia was formed. Our company has entered into an agreement with Quebecor Inc. to purchase all of Sun Media’s English language publications and associated digital properties. That’s 175 daily newspapers, community weeklies, trade publications, magazines and related digital properties from 5 provinces across Canada.

The Rationale of the Transaction

You may wonder – why? When the industry is facing challenges – why are we buying more newspapers now? That’s a good question, and the answer is simple. We, our senior management team and our Board of Directors, believe that this combination is the possible way forward for our Company and for made-in-Canada journalism.

In order to survive and compete against the largest foreign-based digital businesses, we must be strong enough to fight and win. And collectively, this stable of strong brands can do just that. When the transaction is approved, we will be able to offer advertisers the opportunity to reach the full scale and scope of their target audiences with a Canadian option for their marketing programs.

Growing our audiences, with the addition of these brands, supports our Postmedia Reimagined strategy and will offer advertisers extended reach for their programs across all platforms. As we have seen in Ottawa with early results from the reimagined launch beating targets our strategy is moving the needle on how we interact with audiences and what we can offer to advertisers.

And even more exciting things are ahead with the upcoming Reimagined launches in Montreal at the end of October and Calgary at the end of November.

The Numbers

So how can we take on more debt while our priority has been to pay down debt? Much of the purchase price of $316 million will be in equity – current shareholders buying additional shares in the Company which is a significant vote of confidence, in and of itself. We will take on some new debt in this transaction by way of a bond issue, but with the new assets also comes new revenue. In purchasing these assets we add the revenue that the Sun publications generate.

Although we are taking on more debt we’re infusing more dollars into the company in two ways: from our investors and from the new revenue that these properties will add to ours. By doing this transaction, we increase our total revenue, improve our cash flow and bottom line and, most of all, reduce our debt/EBITDA ratio (leverage). Our Bondholders and shareholders should be pleased with this move to deleverage and reduce risk.

Moving Ahead

Regulatory approval may well take several months and we’ll have to be patient. Though we look forward to working with our new colleagues, until approvals are in place and the transaction closes, we can’t begin to collaborate yet. How we integrate all of our brands will be the challenge once the transaction closes and we can move ahead with our new teams.

In the meantime, our current strategy is still THE strategy, and the next phase of Postmedia Reimagined is coming soon. Our strong focus for F15 is on revenue development across all four platforms: Print, Web, Tablet and Smartphone.

We continue to invest in our own company too. We are rolling out training programs to our sales teams – the group most responsible for delivering our revenue targets – and we continue the launch of new products across our operations. We are hiring new expertise into our company focused on strategic growth areas and we are building on our recent successes in Ottawa.

There is no doubt this is very big news. And we have many steps ahead – primarily in obtaining the necessary approvals required to move forward. In the meantime, let’s all keep focused on our strategy and the roles we each play in delivering on our team and company objectives.

You can find more questions and answers on Postmedia Link, through your leaders and by sending them in to Business Updates. We’ll do our best to answer questions quickly and post the most common ones for everyone on our Intranet. We’re not going to have all the answers right now. How we move ahead with our new properties and colleagues will have to wait for the necessary approvals for us to solidify plans, but in the meantime we can continue to be proud of the work we do and look forward to a very exciting future.

Paul

In this memo, Sun Media president and CEO Julie Tremblay tells employees this a “long goodbye.”

Letter to Employees Eng Canada FINAL

QA ENG Employees Canada FINAL