TORONTO - Three veterans of Canada's media industry are taking a swing at buying a trio of major Canwest newspapers, including the flagship National Post, in a bid that could force the media conglomerate to consider selling off its assets piece by piece.
The consortium of investors, headlined by former Canadian senator Jerry Grafstein, said Monday they are only interested in picking up the Post, the Montreal Gazette and the Ottawa Citizen.
If their bid was to succeed, Canwest would have to find someone else to buy the rest of their newspaper operations, which include the Calgary Herald, Edmonton Journal, Victoria Times-Colonist and two Vancouver dailies, the Sun and Province. Canwest has said it believes selling the assets as a whole is a better option.
Grafstein is joined in the bid by former Global TV executive and Montreal Star editor Raymond Heard and Quebec-based writer and broadcaster Beryl Wajsman.
The group said it has "received strong financial commitments" and is in the process of filing a bid to buy the three dailies. It hopes to begin its "due diligence" investigation into the papers' operating data within the next few weeks.
"I'm a believer in the future of newspapers," Grafstein said in a telephone interview.
"We believe that there's a strong role for Canadian newspapers in every community. We think they should be locally owned and controlled and we have very interesting and important ideas about how to generate attention and interest on the Internet to support these newspapers."
Canwest Global Communications Corp. (TSXV:CGS) has placed many of its media properties under protection from creditors in recent months and announced last week an auction process for buyers interested in its newspaper and television assets.
The latest bid cherry picks from Canwest's basket of newspapers, and selects some of those with the largest circulation.
Canwest and its lenders have previously made a case for selling the newspapers as one operation and have said that a number of logical synergies exist between them, including integrated websites led by Canada.com and a relationship with the Post's newsroom, which delivers an array of national news content to local papers.
The Winnipeg-based company's spokesman, John Douglas, said that Canwest will give preference to any bids made for the entire publishing business, which includes all of the newspapers.
"When third parties have looked at these operations they have concluded that they're collectively more valuable than they are as single entities," Douglas said.
Grafstein disagreed and said that Canwest's current operating model is not the only option for the newspapers.
"If you take a look at the history of newspapers in North America, the strongest papers are those that are rooted in each community," he said.
"I believe it's from the bottom up, not the top down."
Media observer Duncan Stewart, director of research and analysis at DSam Consulting, said that the bidders might have a difficult time trying to convince Canwest and its lenders that there is a better operating model for newspapers.
"Newspaper chains are worth more when they all hang together than when they're chopped into bits," he said.
"There are certain costs shared by a newspaper chain and when you try spreading it across three (papers), the economics don't work nearly as well."
Other Canadian companies have approached their financial troubles with a similar attitude - all or nothing on the auction block - only to find their hopes quickly crushed by the realities of the market.
Last year, Nortel Networks wanted to sell its entire business in one transaction, though it quickly became apparent that no Canadian investors were willing to pay the full price. Nortel wound up auctioning off its assets in chunks.
Canwest launched the first stage of the sales process for its newspaper assets a week ago, and several prominent media companies have been pegged as potential bidders, including Black Press, which could be shopping for some of the Vancouver-based papers.
Torstar Corp. (TSX:TS.B), owner of the Toronto Star and a minority shareholder of Black Press, has reportedly also been exploring the opportunity of adding to its roster of more than 100 smaller newspapers.
Another bid is being arranged by Paul Godfrey, chief executive of the Post, and a group of investors, sources close to Canwest have said.
Each of the leaders in the latest Canwest bid has played a prominent role in Canadian media. Grafstein, who retired from the senate Jan. 2 after turning 75, was a founder of Citytv in Toronto, while Heard, 73, worked as editor at the London Observer News Service on top of his roles at Global and the Montreal Star.
Wajsman, 55, is editor of The Suburban, Quebec's biggest English-language weekly and a Liberal insider who testified at the 2005 Gomery inquiry into the sponsorship scandal. Shortly after that, he told Montreal's Le Devoir that he planned to run for the Liberal leadership, even though Paul Martin had banned him from the party at the time.
He declined to discuss his political plans on Monday.
"We're not putting partisanship into this," Wajsman said. "This is a standalone project, and (if) we do this, I'll be pretty happy for the rest of my life."
Wajsman emphasized the importance of the Montreal Gazette on the local community, while also broadening its audience to include more new Canadians.
"I don't think there's anything more important than expanding immigrant-based non-Francophone communities," he said.
"They need to be served by local newspapers, the Web is not enough, they need to be served by vigorous journalists."