Torstar Corp., owner of the Toronto Star, is selling romance novel publisher Harlequin for $455 million in cash to global media company News Corp. and will be run as a division of HarperCollins Publishers.
Torstar said Friday the sale will strengthen its financial position and a portion of the net proceeds will be used for debt reduction.
“We think we did the right thing in exiting,” David Holland, president and CEO of Torstar, said on a conference call to discuss the sale.
Holland said Torstar wasn’t looking to sell Harlequin and was approached by HarperCollins, a subsidiary of News Corp. He noted that Harlequin’s cash flow has been “incredibly important” to Torstar over the years.
“While making the decision to sell was difficult, we are confident that this transaction represents excellent value for Torstar shareholders and importantly further strengthens Torstar’s financial position and capital base as we continue in our evolution as a company,” Holland told financial analysts.
Holland added that HarperCollins will be a “good home” for Harlequin and its future growth.
However, Torstar has said lower revenues were the primary challenge at Harlequin as the book publishing company adjusted to the digital environment.
Harlequin has been part of Torstar for 39 years. Torstar acquired a controlling interest in Harlequin in 1975 and acquired the remaining interest in 1981.
Harlequin has more than 350 employees in Canada, and Holland said HarperCollins plans to keep Harlequin headquartered in Toronto. Harlequin publishes the work of more than 1,300 authors and releases more than 110 titles monthly through publishing operations in 16 countries and about 95% of Harlequin’s revenues are from outside Canada.
Holland said Torstar will take a thorough look at what to do with the remainder of the proceeds from the sale.
“There is clearly a recognition that we’ve got to come to grips with the next stage and what the next stage in the evolution of Torstar is. To be frank, I have not brought forward a recommendation to the board on that,” he said.
HarperCollins president and CEO Brian Murray said the acquisition will broaden the reach of HarperCollins, a subsidiary of News Corp.
“Harlequin’s business has grown internationally, and will give HarperCollins an immediate foothold in 11 new countries from which we can expand into dozens of foreign languages for authors who choose to work with us globally,” Murray said in a statement.
The transaction, subject to approvals, is expected to close later this year.
Torstar recently reported in its fourth quarter that its book division’s revenue dropped to $95.02 million from $104.99 million in the fourth quarter of 2012, and its operating profit declined to $10.25 million from $14.81 million.
Its media operations faced continued pressure on print advertising revenues, although Torstar has said there was relative improvement in the fourth quarter.
Late last year, Torstar announced it was reorganizing the advertising sales operations at the Toronto Star, Canada’s largest newspaper, and moving them to an affiliated company.
News Corp. is a media and information services with news and information services, cable network programming in Australia, digital real estate services, book publishing, digital education, and pay-TV distribution in Australia. It’s headquartered in New York and has activities in the United States, Australia and United Kingdom.
Torstar holds an investment in The Canadian Press as part of a joint agreement with the parent companies of the Globe and Mail and Montreal La Presse.