Transcontinental to end publication of 20 weekly newspapers, sell of 14 others

MONTREAL - Transcontinental announced sweeping changes affecting Quebec's weekly newspaper industry on Wednesday, including closing 20 publications and the sale of 14 others.

The moves, which are expected to result in the loss of about 80 jobs, come as the company (TSX:TCL.A) reorganizes its operations following the acquisition of media rival Quebecor's weekly newspaper portfolio.

Transcontinental said it decided to closed 20 papers after buyers could only be found for 14 of 33 publications that the Competition Bureau said had to be sold if it were to sanction the $75-million deal to buy 74 weekly newspapers owned by Sun Media.

The newspapers, for the most part, will be integrated with other publications it holds in the same regions, Transcontinental said Wednesday.

The Competition Bureau approved the sale of 14 papers to three buyers, including iClic Inc. subsidiary Neomedia, which is acquiring 11 newspapers that will be operated only in online formats. The remaining three newspapers will continue to be published weekly with Transcontinental providing the printing and distribution.

Transcontinental (TSX:TCL.A) decided to keep one of the 19 papers that couldn't find a buyer, and is also closing two of its own weekly publications.

"What we did was re-evaluate our whole portfolio because in many regions where we're ceasing publication we had more than one newspaper in those regions and it was just not viable," said Jennifer McCaughey, director of investor relations.

She said a few employees may find jobs among Transcontinental's remaining network of 120 weekly papers employing some 1,800 workers. The layoffs include 11 reporters, with the rest spread among administration, sales, production and editing.

McCaughey said the Canadian media company is pleased that the lengthy acquisition process which started last December has finally concluded, allowing it to proceed with its strategic plan.

"The newspapers that were up for sale for the most part had been newspapers that had been launched in the last few years and that were, for the most part, in financial difficulty," she said in an interview.

In June, the Competition Bureau said that 34 weekly papers needed to be sold to help preserve advertising competition in local Quebec markets. That number was later reduced at Transcontinental's request to 33 — 11 newspapers that had been launched or acquired by Transcontinental in the past few years and 22 Sun Media community newspapers, most of which had also been introduced since 2010.

Commissioner of Competition John Pecman said the watchdog is satisfied with the number of newspapers that will be sold even though some communities will be disappointed that no acceptable buyer was found or they will lose the paper edition.

"I remain convinced that the bureau has done everything in its power to test the market to determine if there was a possible alternative to Transcontinental owing all the papers. Unfortunately, in some cases like this one, where many newspapers are in financial distress owing to the ongoing transformation of the community newspaper industry, the market dictates that there are limited alternatives," he said in a statement.

The head of an association representing Canadian daily and community newspapers said the situation in Quebec is unique and doesn't reflect the state of the Canadian community newspaper market.

"While the newspaper industry as a whole is having some challenging times, the community sector has actually been a little more resilient than some of the others, certainly than some of the larger dailies because of the hyper local (environment)," said John Hinds, president and CEO of Newspapers Canada.

Canada has 1,040 weekly papers with a circulation of 20.6 million. Ontario is the largest market, accounting for nearly one-third of all papers. It is followed by Quebec, whose 215 newspapers boast have a circulation of 6.34 million. Alberta and British Columbia come next at 133 and 131 papers respectively, the association said.

While the number of community papers across Canada has been stable in recent years, there has been a shift to multiplatform and online editions.

Transcontinental publishes more than 30 magazines, including Canadian Living and Elle Canada, as well as books and flyers. It also has a network of community newspapers in the Atlantic provinces and online portals such as AutoGo.ca and JobGo.ca, and is the owner of the Metro weekday daily in Montreal and co-owner of Metro Halifax.

Its media division earned $3.3 million in adjusted operating income on $320 million in revenues in the six months ended April 30. Overall, Transcontinental earned $102 million on $997.5 million of revenues in the period.

Quebecor Media (TSX:QBR.B) operates Quebec's largest daily newspaper Le Journal de Montreal, Le Journal de Quebec, the 24 Heures free daily, the QMI news agency and Sun Media Corp. which is Canada's largest newspaper publisher.

On the Toronto Stock Exchange, Transcontinental's shares gained 74 cents or 4.85 per cent to $15.99 in Wednesday trading.

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