(Changes dateline to TORONTO from OTTAWA, adds background on
papers and revenue, analysts' comments, share reaction, byline)
By Alastair Sharp
TORONTO May 28 Transcontinental Inc
will have to sell 34 community newspapers to complete a deal to
buy 74 Quebecor Inc Sun Media weeklies, Canada's
Competition Bureau said in approving the transaction on
The two companies said in December that Transcontinental
would buy the papers from Quebecor for C$75 million ($69
million), subject to regulatory approval.
Quebecor, owner of the Sun newspaper chain, is moving away
from print operations in favor of growing wireless and Internet
services. The newspapers being sold, which include 22 Sun Media
titles, are weeklies in smaller communities across the largely
French-speaking province of Quebec.
Transcontinental in some cases would have become the owner of
two competing community newspapers in a given region, the
competition watchdog said.
"In each regional market where the Bureau found that the
transaction could potentially result in a substantial lessening
or prevention of competition for advertising space in community
newspapers, the Consent Agreement requires that at least one
newspaper be offered for sale," the agency said.
Transcontinental has 60 days to find a buyer for the papers,
many of which only launched in recent years.
RBC Capital Markets analyst Haran Posner said buyers
probably will be smaller independents in the province rather
than large national or foreign publishers.
Transcontinental said even after the sale of 34 newspapers
the deal should add some C$20 million to the company's operating
The approval means Quebecor can focus on its growing
wireless business, and whether it wants to expand it outside of
its home province of Quebec, Canaccord Genuity analyst Dvai
Ghose wrote in a note to clients.
He added that "divesting from what we consider a legacy
asset is a strategic positive and we hope to see further
newspaper sales" from Quebecor.
Recently Quebecor discontinued door-to-door distribution of
flyers. News media accounts for less than one-fifth of
Quebecor's overall revenue, according to Thomson Reuters data.
Quebecor bought wireless spectrum across much of the country
in an auction earlier this year, but has been circumspect about
whether it will move quickly to build a national operation.
Transcontinental's shares slid 1.1 percent to C$14.89 on the
Toronto Stock Exchange by midday. Quebecor's most-traded
non-voting stock was up 0.6 percent at C$26.66.
($1 = 1.0864 Canadian Dollars)
(Reporting by Alastair Sharp in Toronto; Additional reporting
by Randall Palmer in Ottawa; Editing by James Dalgleish and Jan