Black Press
investment money
to go for growth

The Toronto Star's publisher
will get a 19 percent stake

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By Dave Segal
dsegal@starbulletin.com

It took 27 years for David Black to build his newspaper empire into what it is today.

Yesterday, he parted with about a fifth of it to keep his business growing.

Black, the owner of the Honolulu Star-Bulletin and MidWeek, decided to cash in on his long-running courtship with Torstar Corp. when he sold nearly 20 percent of parent company Black Press Ltd. to the Canadian media giant for $12.6 million.

"We've had a very good relationship over the years, and they've asked me several times if I would consider selling anything," said Black, the chief executive officer and owner of the company that bears his name. "It was just a mutually agreed-upon time to do something. It took them about five seconds to say, 'You bet.'"

Black, who had been the sole owner of Victoria, British Columbia-based Black Press, said he was eager to raise cash to take advantage of some opportunities in Canada that soon may become available. In the meantime, he said the money simply will improve Black Press' balance sheet.

"There are a number of opportunities in western Canada we've been working on for a while and we would hope to conclude one of those deals," he said. "Any one of them would require us to bring in equity, so this is a first step."

Stock analysts were surprised at the deal that gave Torstar a 19.35 percent stake because it extended its reach beyond its present geographical domain. The analysts also suggested that Torstar, which is traded on the Toronto Stock Exchange, might want to acquire a larger Black Press stake in the future.

"It appears to be an interesting acquisition in the sense that it gets Torstar outside of its core newspaper presence in southern Ontario," said analyst Adam Shine of CIBC World Markets in Montreal. "It complements the company's core strength in newspaper publishing and it remains to be seen what the next evolution of this initial investment will be."

Simon Simonian, an analyst with Canaccord Capital in Montreal, also was caught off-guard but applauded the deal.

"It was a surprise because Black is a privately held company, but it's intriguing for some point down the road," Simonian said. "It's a good transaction if Black was looking for a partner. I believe he found a good partner with Torstar. Torstar understands the business very well."

Black, who now owns 80.65 percent of Black Press, said he has no intention of selling any further stake in the company.

"I'm not stepping backward," he said. "But if we tackle a big acquisition and need additional equity, obviously we would look to (Torstar) first."

Black said the day-to-day operations of Black Press, including the Star-Bulletin and MidWeek, will be unaffected by the deal.

"There are no current plans (with the money) for Hawaii," Black said. "It doesn't need new investment at the moment. There are some things we're doing on an ongoing basis, like improving the press, but no big items."

Bob Steacy, executive vice president and chief financial officer of Torstar, said the deal makes sense in a lot of ways.

"He has a financially strong partner with him who happens to be in the newspaper business and, more importantly, in the community newspaper business," Steacy said. "So we share common customers in the way of national accounts. Hopefully, we'll be able to add to the results of David's operation."

In addition to the Star-Bulletin and MidWeek, Black Press publishes 86 newspapers in western Canada and Washington state. It has annual revenue of approximately $157.5 million.

Torstar, which had 2001 revenue of $882 million, owns four dailies, including The Toronto Star, Canada's largest newspaper. It also owns Internet-related businesses; a group called Metroland Printing, Publishing and Distributing that runs some 68 community newspapers in southern Ontario; and Harlequin Enterprises, a worldwide publisher of romance fiction.

"We have a community newspaper business that's about the same size as Black Press and we like David as an entrepreneur," Steacy said. "We saw this as an opportunity to expand in a business that we like. It also expands us geographically outside the southern Ontario market. But, most importantly, it's a business we know very well and we have very good operations in that business."

Steacy, who said this purchase represents Torstar's only minority stake in a newspaper company, said the firm would have considered purchasing a larger stake of Black Press if it had been offered. "But right now," Steacy said, "we think this is an appropriate level of investment.

"This is a long-term partnership and we'll see how it unfolds over time," Steacy added. "We'd obviously like to own more since it's such a well-run business. But we're here for a long time and a good time."

Earlier this year, Black sold five minority stakes in his Hawaii operations to local business leaders.