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Takeover Bid for Toronto Star Sparks Complaints to Regulator

Takeover Bid for Toronto Star Prompts Complaints to Regulator

A takeover battle for Torstar Corp., owner of the Toronto Star and other newspapers, has sparked multiple investor complaints to Ontario’s securities regulator and raised questions on whether a July 21 shareholder vote on the takeover should go ahead.

The Ontario Securities Commission “has received shareholder complaints in relation to the Torstar bid,” OSC Public Affairs Manager Kristen Rose said in an email. She declined to give details. “This is to ensure the complaint process is not used to affect the market and to promote fairness towards those who are the subject of a complaint or review.”

Torstar accepted a sweetened C$60 million ($44 million) takeover offer from NordStar Capital LP on July 11, thwarting an unsolicited approach from an investor group led by entrepreneur Tyler Proud earlier that week.

NordStar, which is controlled by Jordan Bitove and former Fairfax Financial Holdings Ltd. President Paul Rivett, upped its offer to 74 Canadian cents per share, a 17.5% increase from its 63-cent offer in May. Fairfax, led by Chief Executive Officer Prem Watsa, owns 40% of Torstar’s non-voting shares and already supported NordStar’s earlier offer, according to regulatory filings.

The rival proposal from Canadian Modern Media Holdings, a group that also includes Dye & Durham Ltd. CEO Matthew Proud, investment banker Neil Selfe of INFOR Financial Group Inc. and former Ontario finance minister Greg Sorbara, was for 72 cents a share in cash, plus contingency payments from future asset sales they said could be worth an additional 50 cents a share.

Takeover Bid for Toronto Star Sparks Complaints to Regulator

One Torstar shareholder wrote to the OSC on July 13, raising issues on Fairfax’s involvement in the process and urging an investigation. German investor Juan Carlo Haas holds 300,000 Torstar shares and is represented by Toronto securities lawyer Joseph Groia, a former director of enforcement at the OSC. Groia is aware of at least three letters by Torstar investors urging the regulator to scrutinize the deal.

“The Commission needs to really take a good hard look at this transaction,” Groia said in an interview Thursday. “What’s happened here is a transaction has been done in a way that has been intended to prevent an auction from happening, and if this precedent becomes the norm you’re going to see this happen over and over again.”

Groia’s concerns also include whether Fairfax should be allowed to vote at the shareholder meeting, the use of lockup agreements to prevent an auction, and Torstar’s rationale for accepting what could be seen as a lower price offer. He also cited a lack of disclosure on the value of the company: Groia calculates Torstar has C$250 million in private-equity investments, C$80 million in cash and C$30 million in property, calling into question a C$60 million offer.

No Formal Offer

Torstar Chairman John Honderich, who’s also head of one of the five families who control the company’s voting shares, told BNN Bloomberg that there was no formal offer from Canadian Modern Media that was higher than NordStar’s deal when the decision to sell the company was made, and when the board asked the rival group to increase the cash part of their bid on July 11 “they declined to do so.”

A takeover of Torstar would represent the end of an era for one of Canada’s largest newspapers, which has been controlled by a voting trust of several Toronto families for decades. Torstar has been unable to turn around years of steady losses in advertising revenue and circulation. As of Wednesday’s market close, the stock had fallen 57% since the end of 2017. Torstar’s shares climbed as much as 2.7% today.

Investors have an avenue to contest takeovers and shareholder meetings through Ontario’s securities regulator in certain circumstances by requesting what’s called a transactional proceeding, which could result in a public hearing.

Groia said the regulator could issue an order that would effectively require the shareholder vote not include the Fairfax shares or they could prevent the five family trusts that control Torstar from selling into the current offer.

©2020 Bloomberg L.P.