Postmedia Ignored Mitch Garber's Offer to Buy Montreal Gazette
Postmedia Ignored Mitch Garber's Offer to Buy Montreal Gazette
Despite a financial crunch that will see Postmedia lay off 25% of The Gazette's workers, the newspaper chain won't meet with Garber to discuss a multi-million dollar deal
UPDATE: Postmedia announced Thursday it would form an advisory committee in hopes of growing “subscription and ad revenues” in Montreal. More on that below…
After Postmedia Network announced last month that it would cut 25 per cent of the Montreal Gazette's staff, the company's CEO ignored an offer to sell the newspaper.
Montreal investor Mitch Garber emailed Postmedia CEO Andrew MacLeod on Jan. 27, imploring him to consider the “social and political implications” of gutting Quebec's oldest daily newspaper. Garber wrote that he'd be prepared to discuss buying “all or part of The Gazette.”
MacLeod did not respond to Garber's email.
Undeterred, Garber called another executive at Postmedia three days later to explore what a deal might look like. In an email following their call, Garber even offered to let Postmedia keep whatever government grants the Gazette might receive from Ottawa once Bill C-18 is adopted. The bill would effectively tax Google and Facebook for siphoning revenue from local media and then re-distribute that cash to outlets across Canada.
“I know the owners are sophisticated investors, and if they were to sell the paper we can certainly discuss how they keep upside for what may be a payday from Google/Facebook,” Garber wrote, in an email obtained by The Rover. “Montreal cannot afford to find itself without an English language daily. My sole interest is in keeping the Gazette alive. It's my opinion that it can only be accomplished with local ownership and the resulting ad spend support that a local owner could generate.”
Though Garber says he was treated respectfully in conversations with Postmedia, he also confirmed he hasn't heard back from the company since making the second offer on Jan. 30. News of the rebuffed offer comes as Postmedia is facing a serious cash crunch. The company is carrying over $260 million in debt as print and ad revenue across its 100 plus newspapers continue to drop.
Garber, 58, is perhaps best-known in Quebec as one of the investors on the popular TV show Dans l’oeil du dragon, a French-language spinoff of the CBC hit series Dragon’s Den. A lawyer by trade, Garber has also been part of efforts, alongside Stephen Bronfman, to bring Major League Baseball back to Montreal and is a minority owner of the Seattle Kraken hockey team. Garber’s charitable endeavours — including when he served as co-chair of Centraide Montreal in 2016 — earned him membership in the Order of Canada.
Beyond its announcement that it will lay off 11 per cent of its workforce across the chain, Postmedia’s cost-cutting measures include stopping free delivery of its papers to current and former employees, imposing earlier deadlines for its print editions and attempting to coerce workers into accepting non-compete clauses if they receive a severance package.
After applying for a voluntary layoff — which would continue paying his salary for 52 weeks — one Postmedia employee was told he couldn’t work anywhere else if he hoped to keep receiving his severance. This didn’t just apply to rival publications but any form of paid work, the employee said.
Sources inside the union that represents Postmedia workers say they’ve received a lawyer’s opinion that non-compete clauses are illegal in the case of a layoff. They say Postmedia might remove the non-compete in hopes that more workers will volunteer to lose their jobs.
Another source, who is also taking a voluntary layoff, said they offered to buy their work laptop off Postmedia but was told the company needed to keep all their assets in the event of a bankruptcy hearing.
“You have cameras collecting dust, old iPhones sitting in a box, computers hidden away all because they count as assets on Postmedia’s books,” said the source, who wished to remain anonymous for fear of reprisals. “At this point, every penny counts I guess.”
After The Rover published an article detailing the internal crisis at the Montreal Gazette, Garber went public on Twitter Wednesday night, informing his 45,000 followers that he had offered to buy the paper off Postmedia but was rebuffed. Garber’s statement was seized on by La Presse and Le Devoir, prompting a high-ranking member of the Coalition Avenir Québec government to ask for a meeting with the Montreal-based investor.
In a brief exchange with The Rover, the source would not elaborate on the nature of that meeting.
MacLoed’s office has ignored two attempts by The Rover to interview the CEO. Meanwhile, Gazette editor-in-chief Bert Archer isn’t authorized to discuss the layoffs with reporters. Two sources at Postmedia say there’s a possibility — albeit a remote possibility — that the company could reduce layoffs in the newsroom from 10 people to seven full time employees and a part time worker.
The Gazette’s workers are expected to know their fate Monday. But given that the deadline for employees to apply for a voluntary layoff has been pushed twice, even that remains uncertain.
In a press release published after this story first ran Thursday, Postmedia announced it would create a “Gazette Community Advisory Committee” comprised of Montreal politicians as well as business and community leaders. The committee would work to raise subscription and ad revenue but would not prevent layoffs, according to sources briefed about the initiate Thursday.
Across the chain, Postmedia isn't just laying off reporters and editors. Small publications across Ontario are expected to lose their local advertising directors so the jobs can be outsourced to the mother corporation. In an email sent to its sales department, Postmedia’s senior vice president of sales told employees the company would be “saying goodbye to a significant number of our local sales colleagues.” The senior VP, Adrian Faull, wrote that “streamlining” would “grow revenue and deliver a better client experience.”
In Alberta, Postmedia is moving 12 of its papers online and announced last month that it will sell the Calgary Herald’s offices to U-Haul Co. for $17.25 million.
Another sign that cashflow at Postmedia is tight, the network applied to increase its asset-based credit from $25 million to $30 million at the beginning of this financial quarter. The interest on these loans — backed by assets ranging from laptops and iPhones to buildings owned by Postmedia — are “the bankers acceptance rate plus 8.0%” according to a statement released by the chain last month.
Given their financial struggles, it’s unclear why Postmedia won’t even meet with Garber to discuss a deal that could wipe away millions in debt. Garber said he hopes that making this offer public means MacLeod will at least have to address it with Chatham Asset Management — the New Jersey-based hedge fund that owns 66 per cent of the newspaper chain. Since taking a majority stake in Postmedia, Chatham has laid off some 1,600 employees.
The Montreal Gazette is still profitable due, in large part, to efforts by its ad and online team to monetize sponsored content, tap into new readership via newsletters and drive traffic to the paper’s social media assets and website.
In the event that the newspaper chain enters bankruptcy hearings, owning the Gazette would serve help mitigate losses to Chatham Asset Management. But protecting its American investors will cost people their livelihoods here in Montreal and across Canada.
“There is no plan beyond slashing jobs and serving the shareholders,” said one Gazette employee. “Taking away 25 per cent of our staff gives us no margin for error. When you factor in sick days and vacation time, there will be days where the newsroom is virtually empty, where people will have to scramble more than they already do to keep the lights on.
“We can’t continue to sacrifice our health and the health of journalism in this city so Postmedia’s share price can stay over $1.50.”
One wonders about taxpayer reaction to fed funding for further hollowing out of Canadian media to the benefit of arbitragers. Reminds me of Nortel, minus the fire sale of intellectual assets.