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Transcontinental agrees to lower costs to print La Presse; gets $31M

MONTREAL - Transcontinental Inc. will get a $31-million payment from the owners of Montreal La Presse after agreeing to give the French-language newspaper more flexibility to reduce its printing volumes and save money.

The Montreal-based printer called the new contract "mutually beneficial."

"Given the current pace of change in the newspaper industry, coupled with La Presse's digital strategy push over the past year, the amended agreement aligns TC Transcontinental and Gesca Ltd. more closely with new realities," CEO Francois Olivier said in a news release.

He said the one-time cash payment will compensate Transcontinental for "price reductions" on future services and changes allowing Gesca to reduce the amount of material printed.

The company said the agreement will provide "greater flexibility on price and volume" but said details on the changes, including new minimum printing thresholds, are confidential.

The contract, originally signed in 2003, still expires in 2018.

Transcontinental (TSX:TCL.A) will remain the exclusive printer of the newspaper, owned by Gesca, a part of the Power Corp. (TSX:POW) empire.

After three years of development and $40 million of expenses, the daily tried to tap into readers' growing use of digital media by last year launching its La Presse+ online version, which is available for free on iPads.

It offers readers a more extensive and interactive reading experience that the paper had hoped would attract readers and advertisers alike.

La Presse has said it spent about $90 million annually on printing the paper.

"Given the rapid pace of change in the newspaper industry and the success of La Presse+ and our multi-platform offering, we wished to review the terms of our printing contract in order to obtain greater flexibility with respect to our printing needs," said La Presse president and publisher Guy Crevier.

Transcontinental is Canada's largest printer and a leading media company that specializes in digital media and print, including newspapers, magazines and books. It has more than 9,000 employees in Canada and the United states and $2.1 billion of annual revenues.

Power, through its Square Victoria Communications Group subsidiary, and together with the corporate parent companies of the Toronto Star and Globe and Mail newspapers, owns The Canadian Press.

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