RE:TORSTAR PROBABLY IN MERGER TALKS WITH POSTMEDIA
I will remind readers that less than a year ago Fairfax on November 9, 2017, paid $11.8 million to acquire 9.4 million shares at $1.25/share to hold 28.9 million B shares. The notion that Torstar and Postmedia have the financial and intellectual capital to complete a merger is at best laughable. Postmedia has for years been perched on the edge of bankruptcy and Torstar staggers from quarter to quarter with ever declining results and no tangible sign of a credible turnaround plan.
If shareholders are sitting on the sideline for Godfrey and Honderich to hatch a merger plan I would recommend a very comfortable chair. It’s not going to happen in my lifetime. If it did this would be the equivalent of welding the Titanic to the Lusitania and hoping for a different outcome. They do not have the resources to make this happen and only Fairfax or an equivalent owner can engineer and execute a deal of this type.
There are 30 million B shares not owned by the Voting Trust and Fairfax. Fairfax will make an offer approximating $200 million to buy out these shareholders and consummate a deal with the Voting Trust to privatize Torstar.
Fairfax may already have a deal with Postmedia to rationalize the newspaper market in Canada post-privatization. The rationalization would serve to preserve the industry while eliminating the overheads and duplication of coverage.
In a week Torstar will report its Q3 results and I would expect a continuation of the dismal performance. The clock is ticking on the fossils sitting on the Voting Trust. Fairfax bought 28.9 million shares with a plan. The average cost of the outstanding shares is sliding lower with each passing day of trading.
Fairfax may already have a time or circumstance-dependent deal with the Voting Trust that has not been disclosed. The holders of the 30 million shares should bide their time, collect their dividends and wait for the Fairfax shoe to drop. Don't worry about the current share price as it is indicative of nothing.