PKP and the Quebecor deal: Business or personal?

Martin Patriquin on why the sale of the Sun Media papers meshes with Pierre Karl Péladeau’s political ambitions
Newly-elected Parti Quebecois MLA Pierre Karl Peladeau walks in to the Parti Quebecois special caucus, Thursday, April 10, 2014 in Quebec City. The next PQ leader will be chosen in May, with candidates who want to take the helm of the separatist party having until Jan. 30 to throw their hat in the ring. THE CANADIAN PRESS/Jacques Boissinot
Jacques Boissinot/CP
Jacques Boissinot/CP

It is often difficult to tell what is business and what is personal in matters concerning Pierre Karl Péladeau. The scion of Quebecor, long one of the country’s largest media concerns, has his father’s fiery temperament but not his ability to keep impudence in check. Take, for example, Quebecor’s acquisition of the Sun Media newspaper chain in 1998, the very chain Quebecor has unloaded (pending approval from the Competition Bureau) to Postmedia this morning for $316 million.

Formulated the weeks before Christmas 1998, that deal saw Quebecor nip Sun Media from the jaws of Torstar with a sweet deal indeed: $21 a share, or nearly $983 million—considerably more than TorStar’s $748-million takeover attempt three months before.

It was a princely sum, even in pre-Internet days when content was sold on paper, not given away on a screen. Already, the TorStar/Quebecor war had inflated the share price from $16, with TorStar unwilling to go higher than $19. The previous incarnation of Quebecor, led by its founder, Pierre Péladeau Sr., would have balked even at this amount. Indeed, one of Péladeau Sr.’s last major business decisions was to turn his nose up at a $411-million offer for Sun Media cooked up by his senior management in 1996.

But the 1998 version of Quebecor, led by Péladeau fils, was an entirely different beast. His father passed away in 1997, bringing an end to a frankly awful relationship; the pair reportedly weren’t even on speaking terms in the months before Péladeau Sr.’s death. PKP wanted to put his stamp on the company, and Sun Media was the sweetest of plums.

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Acquiring the newspaper chain gave Quebecor instant national clout—and cowed the chain’s own anti-Quebec bias. No longer would its loudest voices be able to bash Quebec with abandon. If any of Péladeau’s new minions referred to PKP’s father as a “separatist, anti-Semite and ex-alcoholic,” as Diane Francis did in the Sun-owned Financial Post in 1996, they would find themselves on the curb in a hurry.

Business-engineered revenge would become a staple of PKP’s leadership style. In print and in person, he went to war with the CBC. His papers became filled with vitriol toward the public broadcaster, while PKP himself launched a fax machine tirade against Hubert Lacroix, literally clipping out and faxing examples of supposed advertising slights to the CBC president. He oversaw some 16 lockouts of his unionized staff during his tenure at the company.

In this light, it is difficult to see the sale of Quebecor’s Sun Media properties as a typically rash decision of Quebecor’s largest shareholder. Selling an asset for about a third of its acquisition price recalls the Homer Simpsonesque mantra of buying high and selling low. Though it has struggled like most print media, the chain still made nearly $100 million in operating profit last year. One can’t help but wonder whether Quebecor might have found a more spendy suitor had it held out.

Yet there is a wholeheartedly rational aspect to Péladeau as well. He quickly buried the hatchet with the CBC when a joint advertising deal reared its head. As a politician—he was elected to the Parti Québécois last April—he is reinventing himself as a defender of the modèle Québécois of high taxes and state intervention. It is the antithesis of what he once preached.

In this sense, the Quebecor/Sun Media sale makes perfect sense. Last March, PKP exploded out of the separatist closet, loudly declaring his desire for an independent Quebec. Today, he is vying for the PQ leadership, and his ownership of a proudly Canadian newspaper chain was bound to become all the more irksome. In ridding his company of hundreds of newspaper titles, he can now claim he is hardly the politico-media oligarch his critics claim he is.

The Quebecor and Sun Media deal will still need the benediction of the Competition Bureau. Even if it shouldn’t go through, though, PKP has at least signalled that he is far less interested in the business over which both he and his father once obsessed. He is a politician now, with his sights squarely set on the acquisition of the Parti Québécois. The real businessman in this deal is Postmedia president and CEO Paul Godfrey. Consider this: Godfrey was head of Sun Media when Péladeau bought the property for $982 million. Sixteen years later, he bought the same horse—tired, sure, but still with considerable operating profits—for $312 million. And having acquired this horse, he will whip it into shape by way of an ugly bloodletting.