A new era is set to dawn for the Toronto Star and its publisher.
Just a day before the deal was supposed to close, an Ontario court has approved the takeover of Torstar by entrepreneurs Jordan Bitove and Paul Rivett.
The $ 60-million bid, submitted through Bitove and Rivett’s company NordStar Capital, got the thumbs-up from Superior Court Justice Cory Gilmore following a brief “fairness hearing” last Thursday.
“I find that the arrangement is fair and reasonable and should be approved by this court,” said Gilmore in her decision released via email late Monday night.
Gilmore rejected arguments from competing bidder Canadian Modern Media Holdings that Torstar’s board had stopped negotiating with CMMH after receiving its first bid, which was subsequently topped by NordStar’s final offer of 74 cents per share.
“After receipt of the initial bid from CMMH, Torstar urged CMMH to increase the cash component of its offer to above $ 0.72 per share. It chose not to do so. CMMH cannot now blame Torstar for its business decision not to increase the cash component of its offer at that critical point,” Gilmore said.
“CMMH now claims the process was not fair or transparent while having had every opportunity to present its best bid at a time when it would have had to have been considered.”
Gilmore also said the fact 98.7 per cent of shareholders approved of the deal was important. “The ‘business judgment’ of security holders in determining their own interests is to be given great weight,” she said.
The NordStar team said the deal is now expected to close on Wednesday or Thursday of this week, given the timing of Gilmore’s decision.
In a brief interview, Bitove said he and Rivett were gratified by the ruling.
“Paul and I are extremely excited to get going with the Star team and to continue the digital transformation, and honouring Joseph Atkinson’s principles and his progressive legacy,” said Bitove.
In an email, CMMH team member Neil Selfe said his group is not giving up.
“CMMH continues to believe that the proposed transaction as contemplated by the plan at $ 0.74 per share, is neither fair nor reasonable. As such, CMMH expects to immediately commence an appeal of today’s decision and will seek a stay of Justice Gilmore’s decision, preventing the closing of the plan, pending the determination of the appeal,” Selfe said.
Gilmore’s decision follows a lively one-hour hearing last Thursday where submissions were presented by NordStar, Torstar, CMMH, and a disgruntled minority shareholder.
During the hearing, Torstar lawyer Ryan Morris criticized Selfe and minority shareholder Patrick Collins, former publisher of the Torstar-owned Hamilton Spectator.
“The objectors here are a bitter, failed bidder and a disgruntled former employee,” Morris said, arguing that Gilmore should dismiss objections to the deal.
Last Tuesday, 98.7 per cent of Torstar shareholders voted in favour of the 74-cent-per-share bid from NordStar. According to a Torstar press release, 99.7 per cent of the votes by Class A shareholders were in favour of the deal, along with 98.1 per cent of Class B shareholders. Even among shareholders who hadn’t signed lock-ups, support was strong, with 81.9 per cent voting in favour.
The day before the shareholders’ vote, the competing bid from CMMH was raised to 80 cents per share. CMMH had originally offered 72 cents per share, just over two weeks ago. On July 11, Torstar announced that Bitove and Rivett had raised their own 63-cent-per-share offer to 74 cents, and that the five-family “voting trust” which had controlled Torstar’s Class A shares, as well as Fairfax Financial, which had held 40 per cent of Torstar’s Class B shares, had signed “hard lock-ups,” guaranteeing their support for the NordStar bid.
CMMH’s bid included technology executive brothers Matthew and Tyler Proud, as well as Selfe, a finance industry veteran.
According to court documents, Matthew Proud left his official role with CMMH during the bidding process because of the impending IPO of Dye and Durham, a legal software company where he’s the CEO.
Bitove and Rivett have publicly vowed to maintain the Star’s progressive values, including the Atkinson Principles, named for long-time Star publisher Joseph Atkinson.
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They also dismissed suggestions from a member of the CMMH bid team that they were planning to sell the Star to Postmedia. Former Ontario finance minister Greg Sorbara — part of the CMMH team — has predicted that would be the case. Other observers have pointed to the fact NordStar’s bid is being financed by Canso Investment Counsel. Canso is Postmedia’s largest debt holder.
“Let us be absolutely clear: The financing arrangements for the NordStar bid are not, in anyway whatsoever, connected directly or indirectly with any other media company,” a NordStar spokesperson said in late May, after Canso’s involvement became public.
While the source of CMMH’s funding hasn’t been named in any public documents, several sources have confirmed to the Star that the bid was funded by Alberta’s Canadian Western Bank.