Postmedia Network Canada Corp. said Tuesday that it's in talks to merge with Nordstar Capital LP, the owner of Metroland Media Group and the Toronto Star.
The two publishers say the proposed deal, which is yet to be finalized, is a bid to create greater scale so they can respond to the "existential threat" facing the media industry.
“The viability of the newspaper industry in Canada is at an extreme risk," said Jordan Bitove, publisher of the Toronto Star, in the news release.
Postmedia said discussions to consider a combination are so far non-binding, but that the proposed merger would see an even division of voting rights. Postmedia shareholders would hold a 56 per cent economic interest and Nordstar would hold a 44 per cent interest.
Bitove, owner of Nordstar, would be chairman of the merged entity and Andrew MacLeod, chief executive of Postmedia, would be CEO.
Postmedia says the proposal would see the Toronto Star maintain editorial independence through the incorporation of a new company that would manage its editorial operations.
It says the deal would involve converting some of its outstanding debt to equity, resulting in "significant economic dilution" to existing shareholders, while reducing the overall debt of the merged entity.
"The core rationale for the proposed merger is to create a new entity with reduced debt, national digital scale to compete with the global technology giants and economies of scale in the business model," said MacLeod in the release.
"The proposed merged entity would provide the best opportunity to ensure strong news media coverage for Canadians from coast to coast."
Postmedia said it confirmed the discussions in light of unusual trading activity, which saw its share price climb by over 50 per cent on the day.
Postmedia announced significant layoffs in January this year, with around 11 per cent of editorial staff to be affected. The company owns publications including the National Post, Vancouver Sun and Calgary Herald.
In recent years, Postmedia has closed a number of small-town newspapers, reduced print production of some of its titles, and moved some to digital-only formats to manage costs, among other layoffs and buyout offers.
Last week, Jamie Irving resigned as executive chair of the media conglomerate's board. He had held the role for less than seven months after assuming the role when longtime Postmedia chairman Paul Godfrey stepped down.
This report by The Canadian Press was first published June 27, 2023.
Torstar holds an investment in The Canadian Press as part of a joint agreement with subsidiaries of the Globe and Mail and Montreal’s La Presse.
This is a corrected story. The headline in a previous version erroneously described the deal's structure.