Disappointing performance of Troll and purchase of rival newspaper chain prompts sale
Torstar's attempt to diversify its publishing business by expanding into the American supplementary education market ended abruptly last week with the announcement that Torstar has hired Morgan Stanley to help the company find a buyer for the group. Torstar will use the proceeds from the sale to help fund its takeover attempt of Sun Media, a rival Canadian newspaper publisher.
Torstar chairman David Galloway said the decision to sell the children's supplementary educational publishing group "was a difficult one." The sale was prompted in part by the poor performance of Torstar's most recent acquisition in the group, Troll Communications, whose losses have dragged down the results of the entire division. All other units in the group are profitable, Galloway said.
Torstar entered the supplementary education business in 1994 when it acquired Frank Schaffer Publications. Subsequently it added Tom Snyder Productions, Delta Education, Warren Publishing House, Judy/Instructo, Good Apple and Brighter Vision. The division now has about 1000 employees and annual revenues in excess of C$300 million.
Torstar's boldest step to become a major player in the supplementary market was its purchase of Troll for approximately $140 million. Troll is America's second largest book fair operator, and Torstar had hoped to use Troll to sell products from its other divisions through that marketing channel. Troll, however, has been a disaster since Torstar acquired it in July 1997, losing a total of about C$15 million since its purchase. And in its third quarter, Torstar reported an operating loss of C$61.3 million in its supplementary group that was due to losses from operations as well as from estimated costs associated with the disposal of the division.
The story was different at Torstar's Harlequin subsidiary, where third quarter sales rose 10%, to C$138.2 million, and operating profit also rose 10%, to C$23.1 million. For the first nine months of the year, Harlequin's sales rose 5%, to C$388.5 million, and earnings increased 6%, to C$66.4 million.
