Torstar’s family trust sells near market bottom

It seems hard to imagine in this digital age, but Torstar Corp. was once a multibillion-dollar media platform, coveted by rivals, and its five controlling families boasted wealth comparable to that of many modern tech entrepreneurs.

Now those five families – descendants of former Toronto Star publisher Joseph E. Atkinson, who died in 1948, and four former senior executives – are selling voting control in the 128-year-old company for $6-million. They spurned overtures from Fairfax Financial Holdings Ltd. four years ago at far richer levels. Less than two decades back, their stake was worth nearly $300-million. And in a pre-internet era, Torstar fought on equal terms with rivals such as Rogers Communications Inc. for control of cable networks, and the controlling shareholders turned down lucrative takeover offers.

For the second, third and fourth generations of the families, the decision to throw in the towel was driven by the company’s 2019 decision to suspend common share dividends. “That was the final straw,” said entrepreneur Jordan Bitove, who is teaming up with former Fairfax president Paul Rivett to buy Torstar for just more than $51-million. “The numbers were challenging, a significant investment was needed to complete the digital transformation of the business, and then came the dividend cut.”

Torstar was born out of a newspaper first published in 1892. What was then called the Evening Star hit the streets of Toronto after two-dozen printers were locked out at a rival paper and launched a four-page daily. It was the seventh newspaper competing for readers in Toronto, at a time when the city had a population of 180,000. In 1899, Atkinson took the reins, running the paper for 50 years and building the largest readership in the country by taking a progressive social position while also playing a leading role in the Liberal party.

When he died, Atkinson left control of the company in a charity. In 1958, after the Ontario government ruled charities could not own businesses, Atkinson’s heirs and four senior executives set up a voting trust and bought control of the flagship Toronto Star for $25.6-million. For a time, tight family control made Torstar a cash-generating machine that built a regional media empire and moved into books by acquiring Harlequin, the romance publisher the company eventually sold to News Corp. for $455-million in 2014.

Then came the internet, and the rise of Facebook and Google as the first option for both readers and advertisers. In 2018, the Torstar board chair John Honderich, the second generation of one of those five families, said in a Globe and Mail interview he was looking for a buyer for the company.

“Quite frankly, I’d be derelict if I hadn’t been trying to find, is there a Jeff Bezos around who wanted to come in,” Mr. Honderich said, referring to the Amazon.com Inc. founder’s purchase of The Washington Post. “There are certain people who can afford to do that and feel it’s important. There aren’t many of those around. And Canada’s a small place.”

Torstar has 9.8 million class A voting shares, almost all of which are owned by the five families, and non-voting class B shares. As recently as 2004, those shares were worth $30 each. Now NordStar Capital, a company controlled by Mr. Bitove and Mr. Rivett, is buying Torstar for 63 cents a share.

Mr. Honderich’s total stake in Torstar is worth $3.2-million, according to a regulatory filing. The Honderich family and two others in the shareholder group hold stakes of the voting A shares that are worth a total of just over $900,000.

Another family, the Hindmarsh clan, own 1.9 million Torstar class A shares, worth $1.2-million under the terms of NordStar’s offer. The regulatory filing lists 31 different Hindmarsh family members and trusts. If they all receive an equal stake, each Hindmarsh heir would receive $39,000 after controlling what was a leading Canadian media company for six decades.

With files from Susan Krashinsky Robertson

Editor’s note: (May 28, 2020) The spelling of Hindmarsh has been corrected in the online version of this story.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.