Torstar pays $51.5 million to boost stake in Metro newspapers to 90 per cent

TORONTO – Torstar Corp. (TSX:TS.B) will pay $51.5 million to take nearly full control of the Canadian chain of Metro free daily newspapers, which are read by more than one million commuters each day.

The Toronto-based media group, which owns the Toronto Star, other dailies, community newspapers and the Harlequin book-publishing business, said late Friday it has raised its stake in Metro to 90 per cent.

Torstar previously owned 50 per cent of the chain, which was originally the Canadian version of an international group of free commuter newspapers.

“It’s a profitable business and it’s profitability has been growing,” said David Holland, Torstar’s president and CEO

“It appeals to a good audience, an attractive audience for advertisers, and that’s something we want to continue to do.”

The Metro operation is also known as Free Daily News Group. It had been jointly owned by Torstar and Metro International S.A., the Swedish company which operates free papers around the world.

Metro International will continue to hold a 10 per cent stake in the English-language newspapers, Torstar said.

The Canadian publications are handed out free in Toronto, Vancouver, Ottawa, Calgary, Edmonton, Winnipeg and London. In Halifax, Metro has a joint venture with Transcontinental Media G.P., a division of the big Montreal-based newspaper publisher and commercial printer.

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Metro has expanded rapidly in the decade since it first launched in Toronto. Earlier this year, it debuted in London, Ont. and Winnipeg. Holland said there is no immediate plan to add more cities. The chain focuses on growth in existing markets, but it will consider new opportunities.

The commuter papers have been in some markets less than five years, but have shown growing readership and ad revenue, making it a very attractive business for the newspaper owner, Holland said.

Metro has become one of Canada’s most widely-distributed newspapers and operates on an advertising-only revenue model.

Holland said that model works well for the commuter newspaper, a short read that relies mainly on content from news services.

“This particular product is a relatively quick read, doesn’t rely as heavily on investigative journalism and I think the advertising-only model is actually well-suited to this product,” he said.

But that doesn’t mean it could take the place of paid daily newspapers, which require larger investments in their editorial departments, he added.

Metro is also published in French in Montreal, but the Torstar group doesn’t have a stake in that venture.

Torstar is one of Canada’s largest media companies, with about 6,600 employees and operations in newspapers, digital businesses and book publishing.

Its dailies include the Toronto Star, Canada’s largest daily circulation newspaper, the Hamilton Spectator, Waterloo Region Record, Guelph Mercury and Sing Tao Chinese-language paper in Toronto.

Its websites include Thestar.com, Toronto.com, Travelalerts.ca and Workopolis.

The company also owns Metroland Media Group, publishers of community and daily newspapers in Ontario, as well as Harlequin Books – the world’s biggest publisher of romance fiction.

Like all newspaper owners, Torstar has been affected by the soft economy that has hurt advertising and technological changes that have squeezed the newspaper industry in recent years.

The company has cut jobs, sold non-core assets and gone on an efficiency drive to keep its finances in good shape in the increasingly competitive industry.

In its second quarter ended June 30, Torstar said the sale of the company’s minority stake in CTV Inc. boosted its second-quarter profit to $228.3 million from $23.7 million a year ago. It will report third quarter results on Nov. 2.

The Metro announcement came after stock markets closed Friday.

In earlier trading,Torstar shares closed three per cent higher or 29 cents to $9.73 on the Toronto Stock Exchange.