Power Corp. prepares to exit newspaper business, targets U.S. expansion
Co-CEO Paul Desmarais Jr. says the Canadian holding company is examining some of its capital intensive businesses to see if they can be sold at attractive prices.
Co-CEO and brother, Andre Desmarais, added that insurer Great-West Life and fund manager IGM Financial are not on the sales block.
Desmarais said he expects other Canadian newspaper owners will take a hard look at its decision to transform its Montreal La Presse news group into a not-for-profit structure.
The 130-year-old newspaper is owned by Square Victoria Communications Group, a subsidiary of Power, which plans to grant $50 million to the venture.
Under the new structure, Power Corp. would no longer own the media company or have any ties with the not-for-profit structure.
“I think it makes a lot of sense and I think it makes sense for English Canada as much as it does for Quebec,” he told reporters.
Desmarais noted that all news media outlets are grappling with the rise of digital competitors such as Google and Facebook, and will have to figure out how to proceed.
“Everyone will have their why now moment and probably a public company will have a why now moment a lot faster than a private company.”
Part of the shift in La Presse’s ownership structure is designed to allow it to get donations and funding from government, which is unfeasible as long as it is owned by one of Canada’s richest families.
“If I was in government I wouldn’t give a subsidy to the Desmarais family. It would be misinterpreted,” he said.
But Andre Desmarais said he’s optimistic that the federal government, which is studying funding for national newspapers, will end up providing funding because it would want to help a medium that supports democracy. He noted that the CBC gets about $1 billion a year, but just for the broadcast medium.
Meanwhile, Paul Desmarais told shareholders that the Lafarge board of directors, on which he is a member as the owner of 9.43 per cent in Lafarge-Holcim, was not aware of the cement maker allegedly funding Syrian militants until it was reported on by the media in 2016.
“As soon as this matter was brought to its attention, the board of directors immediately initiated an independent internal investigation, the results of which were, on its own initiative, turned over to the authorities with the assurance of its co-operation,” he said in a statement read to reporters.
It also implemented additional compliance and internal control measures.
French and Belgian authorities are investigating several ex-employees for their alleged roles in indirectly funding groups including Daesh (also known as the Islamic State or ISIS) to guarantee safe passage for staff and supply of plants.
The wrongdoing precedes Lafarge’s merger with Swiss company Holcim in 2017.
Power Corp. says its net earnings more than doubled to a record $525 million or $1.13 per share in the first quarter, compared with $258 million or 56 cents per share in the prior year quarter.
Excluding restructuring and other charges last year, adjusted profits were $269 million or 58 cents per share in the first quarter of 2017.
Power increased its quarterly dividend 6.6 per cent to 38.20 cents per share, payable June 29 to shareholders of record June 8.