When news surfaced that Network Canada (CA:PNC.A, CA:PNC.B) was in merger talks with Nordstar Capital LP, the parent company of the Toronto Star, Postmedia’s shares shot up by 45%.

The two companies are at the table to figure out the best way forward together in a less-than-ideal operating environment. The Canadian print media industry — as elsewhere — has withered on the vine over the past decade as global digital platforms have taken control of news dissemination.

Survival of Canada’s two largest newspaper chains means the companies must undertake a shotgun wedding — you couldn’t find two more different corporate cultures and editorial viewpoints if you tried — and the ramifications for Canadian media are potentially devastating … but likely necessary.

PNC.A stock, the Class C voting shares, is up 66.4% in the last month, while PNC.B stock, the Class NC variable voting shares, has seen about half of that gain, up 34.8%.

The question is whether a successful merger makes Postmedia stock worthy of investor speculation in the future, or is this the beginning of the end for Canada’s two largest newspapers?

Devil in the Details

According to the press release from the two companies, they are in non-binding discussions contemplating the merger of Postmedia with Nordstar Capital’s Metroland newspapers and certain assets of the Toronto Star.

While both parties would control 50% of the combined entity’s votes, Postmedia would own 56% of the equity, with Nordstar owning 44%. Jordan Bitove, Nordstar owner and publisher of the Toronto Star would be chairman, while Postmedia CEO Andrew MacLeod would be CEO.

One piece of good news is that the Toronto Star would maintain its editorial independence from the new entity by creating a new company, Toronto Star Inc., which would operate the paper. Nordstar would own 65%, and Bitove would remain its Publisher.

“The core rationale for the proposed merger is to create a new entity with reduced debt, national digital scale to compete with the global technology giants and economies of scale in the business model. The proposed merged entity would provide the best opportunity to ensure strong news media coverage for Canadians from coast to coast,” said Andrew Macleod, president and CEO of Postmedia.

The newspaper’s editorial position has traditionally been viewed as more center or left-leaning. Postmedia has traditionally taken a more conservative or right-leaning editorial position in its coverage of Canadian issues.

It will be interesting to see if the two parties can preserve the editorial independence of all its newsrooms, as MacLeod stated in the joint press release addressing the speculation.

It’s important to note that the discussions are going on now; There is no official merger agreement in place.

State of the Two Businesses

In January, Postmedia announced that it would lay off 11% of its editorial staff across all of its media properties nationwide.

“It’s brutal. They’ve already cut, and cut, and cut, and cut. I mean, they’re already in the basement. And they’ve just dug a new basement,” the Daily Hive reported comments from CWA Canada union president Martin O’Hanlon.

“It’s terrible for communities. It’s terrible for employees. It’s terrible for democracy. And it’s brutal for journalism,” O’Hanlon said.

In Postmedia’s most recent quarter, ended Feb. 28, its overall revenues increased by 9.1%, to $111.8 million, from $102.5 million a year earlier. Excluding its Parcel Services revenue, its revenues decreased by 1.9% from a year ago.

The company’s operating loss in the second quarter was $11.7 million, slightly less than its operating loss a year ago. Its balance sheet shows a deficit of $1.08 billion, indicating the accumulated losses over the years. Its long-term debt was $261.1 million, 140% of its market cap.

Torstar’s operations are now in the privately owned hands of Nordstar Capital, which acquired Torstar in 2020. Nordstar paid $60 million to purchase the company.

In the year before Nordstar took control, Torstar generated annual revenue of $479 million, with a $64 million operating loss, considerably higher than a year earlier. As of Dec. 31, 2019, it had $134.1 million in long-term debt on its balance sheet.

This article originally appeared on Fintel

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