Torstar’s new owners are selling off portions of the company for a premium over the purchase price.
VerticalScope’s stake in digital publishing platform Torstar is valued at three times that of Torstar itself.
After the initial public offering of one of Torstar’s digital publishing subsidiaries, the new owners of the Toronto Star have already more than recouped their investment in the newspaper chain.
NordStar Capital acquired Torstar for $60 million last year, but in addition to the iconic newspaper for which the company is named, NordStar acquired a slew of other under-the-radar assets.
One of them is VerticalScope, a digital publishing company. VerticalScope, founded in 1999, operates more than 1,200 websites covering a broad range of topics. The company hosts digital communities for enthusiasts of everything from automobiles and photography to parenting and outdoor activities like archery, fishing, and sailing. Each month, they engage with a combined 100 million users across their entire network of websites.
According to regulatory filings, the company earned more than $60 million in revenue last fiscal year.
Although the ownership structure of VerticalScope has changed several times over the course of the company’s more than two decades, it has been controlled by Torstar since 2015, when the newspaper chain paid $200 million for majority control of the company. However, VerticalScope completed its initial public offering on the Toronto Stock Exchange on Monday, raising $125 million through the sale of nearly six million shares to the public at a price of $22.
“Completing this initial public offering is a significant milestone for VerticalScope,” said CEO Rob Laidlaw, who founded the company over two decades ago. “With the proceeds raised, we are well positioned to accelerate our accretive acquisitions while maintaining our commitment to our software platform.
Despite VerticalScope’s public offering, NordStar retains just under 40% of the company, a stake worth about $180 million at the current price of about $22.33 per share nearing midday on Monday.
That is sufficient to cover NordStar’s investment in the parent company threefold.
Julian Klymochko, CEO of Calgary-based alternative ETF seller Accelerate Financial Technologies Inc., stated that he is unsurprised to see Torstar’s new owners divest valuable assets. His company owned shares in Torstar prior to it being acquired by NordStar, and the primary reason it did so was to diversify the company’s holdings beyond the core newspaper business.
“It’s unsurprising given the enormous asset value, which is becoming increasingly obvious,” he told CBC News in an interview.
Torstar was the subject of a bidding war last summer, which NordStar won despite not presenting the best offer, Klymochko said.
“They passed on a higher bid,” he explained. “The board of directors sold the company for less than the assets were worth, but even less than the cash flow at one point.”
“NordStar got a sweetheart deal,” he explained.
And it appears as though Torstar’s new owners are more than happy to flaunt their new love to the world — and extract revenue streams from it.
The company launched a parcel delivery service in November and later that month sold a digital marketing service to grocery chain Loblaw Companies Ltd.
Torstar acquired the SCOREGolf brand in January in partnership with retailer Golf Town, and Cineplex Magazine in March, which moviegoers thumb through while waiting for their film to begin.
That same month, Torstar made headlines for its most audacious proposal to date: a proposal to open a casino.
While Klymochko believes VerticalScope is a sound business, he has no plans to invest in the company now that it has gone public, as his firm focuses on acquiring undervalued assets.
“Obviously, Torstar was,” he stated. “It was significantly more valuable, and as shareholders, we were quite dissatisfied with the process.”