Canadian regulator approves Postmedia-Sun Media deal

By Euan Rocha

TORONTO (Reuters) - Canada's competition watchdog on Wednesday approved Postmedia's proposed takeover of Quebecor Inc's (QBRb.TO) Sun Media English-language newspapers and websites, paving a path for Postmedia to control a majority of the English-language dailies in Canada.

The C$316 million ($253 million) deal announced in October will transform the country's newspaper landscape, making Postmedia the owner of competing major local dailies in cities such as Ottawa, Edmonton and Calgary.

The deal will bring some 175 newspapers and publications, including the Sun's flagship assets - the Ottawa, Toronto and Calgary Sun newspapers - into the Postmedia fold.

Following an extensive review, the Competition Bureau said the acquisition was unlikely to "substantially lessen or prevent competition."

Competition lawyers had said the Bureau was most likely to focus on the reduction of advertising options that could result from the deal.

"Our review concluded that there would not be significant anti-competitive effects for readers or advertisers," the Commissioner of Competition John Pecman said in a statement.

It said Postmedia, represented by law firm Goodmans, made "persuasive submissions" the effects of any lessening of competition would be offset by meaningful "efficiencies."

Earlier this year, the Supreme Court foiled the regulator's bid to unwind a tiny landfill deal in British Columbia on the basis of the efficiencies defense. That defense allows companies to argue that a potentially anti-competitive deal ought to be permitted if it results in savings and reduces costs.

Lawyers noted at the time that the ruling would make it much harder for the Bureau to challenge potentially anti-competitive deals in the future. The Bureau said at the time it would alter its analysis and information gathering during the merger review process in light of the ruling.

Despite the huge ownership concentration resulting from the deal, some analysts played down competition concerns, citing increased activity from free online offerings.

Postmedia plans to operate the major Sun dailies and their websites side by side with its existing publications in markets with multiple brands, as it has in Vancouver for decades with the Province and Vancouver Sun.

Postmedia, home to the National Post, Calgary Herald and other Canadian newspapers, is also gaining control of a host of community dailies and weeklies.

Postmedia competes against Torstar Corp (TSb.TO), publisher of the Toronto Star. Competitors also include the Globe and Mail, a national daily majority-owned by the Thomson family, which also controls Thomson Reuters Corp (Toronto:TRI.TO - News).

(Reporting by Euan Rocha. Editing by Tom Brown and Andre Grenon)