The Successful Investor Hotline – Friday, May 2, 2014

Article Excerpt

TORSTAR CORP., $8.15, Toronto symbol TS.B, jumped 22% on Friday after it agreed to sell its Harlequin book-publishing subsidiary to News Corp. (Nasdaq symbol NWSA), the parent company of publishing firm HarperCollins. In 2013, Harlequin supplied 29% of Torstar’s revenue and 32% of its earnings. The company will receive $455 million, which is equal to 70% of its $651.4-million market cap (or the value of all of its outstanding shares). The deal should close by September 30, 2014. Torstar plans to put the proceeds toward its debt, which stood at $177.6 million on December 31, 2013. It could use the remaining cash to buy back shares, raise its $0.525-a-share annual dividend (which yields 6.4%) or pay a special dividend. Selling Harlequin means Torstar will focus entirely on its cyclical newspaper and Internet businesses. That adds risk, but the company’s aggressive cost cuts have helped make these operations more profitable. In addition, many of its papers are market leaders, which puts them in a good…