Canadian newspaper chain Postmedia to lobby Ottawa on increasing foreign investment in newspaper sector, which analysts say would help company in anticipated sale within a few years; Canada now deters foreign ownership

Sandy Yang

LOS ANGELES , January 10, 2012 (Industry Intelligence) –

Postmedia Network Canada Corp., owner of Canada’s largest newspaper chain, plans to lobby for Canada “to allow foreign investment in Canadian newspapers,” according to documents filed with the public registry of lobbyists, reported The Globe and Mail on Jan. 9.

The documents were filed in a registration last month by lobbyist David Angus of Capital Hill Group Inc., in Ottawa on behalf of its client Postmedia, which is based in Toronto.

While the government announced in March 2010 that it would seek to open up the newspaper industry to more foreign ownership, there has not been much discussion about the rules for newspaper ownership, The Globe and Mail reported.

Postmedia will need to find a committed buyer as its current investors are expected to move to sell their stakes in the company within the next few years. The investors are led by New York-based Golden Tree Asset Management LP and other funds.

Toronto-based Torstar Corp. could be a prospective buyer, according to speculation from analysts such as Drew McReynolds with RBC Dominion Securities Inc., reported The Globe and Mail.

Others, though, are not sure a Canadian buyer will come forward or have a bid high enough. For a premium to be paid for the company, it would have to come from a “foreign plan,” said one media analyst who requested anonymity.

Calls seeking comments from executives at Postmedia and from Angus of Capital Hill Group were not returned on Monday.

Canada’s Income Tax Act includes a requirement that poses an impediment to foreign investment in newspapers as it prevents advertisers from deducting their spending on ads that are not in newspapers qualifying as Canadian-owned, The Globe and Mail reported.

Postmedia keeps its voting control under Canadian ownership while getting around the issue of foreign investment with a dual-share structure for its stock. However, selling the entire company to a foreign buyer would be problematic under Canada’s current tax laws.

Another restriction to foreign ownership is that such an investment -- should the asset be worth C$5 million or more -- must be reviewed by the Minister of Heritage to determine if it would provide a “net benefit” to Canada, reported The Globe and Mail.

The primary source of this article is The Globe and Mail, Toronto, Ontario, on Jan. 9, 2012.
 

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