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It’s a happy ending for all as Harlequin yields to Murdoch’s embrace

Could there be a more fitting acquisition for media magnate Rupert Murdoch than Harlequin Enterprises Ltd., the world's best-known publisher of romances, more than a few of which revolve around a beautiful, intrepid young woman finding true love with a dashing, globetrotting gazillionaire?

Take out the dashing part, slice several decades off Mr. Murdoch's 83 years, toss in his late-in-life search for true love, and you'd have an ideal Harlequin character.

Fortunately for News Corp., Mr. Murdoch's publishing empire, the match with Harlequin is much less likely to end up in a messy divorce than his most recent personal romance.

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News Corp. is snapping up the famous publisher of bodice-rippers from Torstar Corp. for $455-million in cash. It's a deal that makes eminent sense for both parties.

Torstar intends to use the proceeds to pay down debt and give the company more flexibility in meeting future cash needs, including potential acquisitions that will fit better with its core business. More important, from the point of view of key shareholders, the deal provides some assurance that Torstar will be able to keep those crucial dividend payments flowing.

Harlequin, which was started in 1949, has been controlled by Torstar since 1975 and wholly owned since 1981. For most of those years, it has been a valuable source of stable profits for the parent company, virtually recession-resistant and an excellent counterweight to its more cyclical – and definitely not recession-proof – newspaper operations. But Harlequin's sales and profits have been eroding recently, particularly in North America and Europe.

From News Corp.'s side of the table, Harlequin still retains plenty of global brand appeal – and important footholds in non-English-speaking markets. Its titles are available in more than 30 languages and 102 markets. HarperCollins Publishers, News Corp.'s book arm, has no current exposure in 11 of those markets and publishes almost all of its books solely in English. Harlequin reaps about 40 per cent of its revenue from non-English versions of its books.

Another attraction is Harlequin's expanding digital platform, which accounts for a sizable chunk of sales. It's a lot easier and cheaper to buy more global e-book distribution capability than building your own.

Also, unlike Torstar, HarperCollins ought to be able wring out considerable savings by folding the Toronto-based company into HarperCollins's larger-scale publishing operations, including its Avon Books imprint, which produces the company's romantic fare. This includes such titles as How to Lose a Duke in 10 Days and Recklessly Royal. (Tag line: "Sleeping beauty is tired of sleeping alone.") Imagine the sales potential when this stuff is translated into 33 other languages.

"This acquisition is not only about sense and sensibility but structure and sensibility," News Corp. chief executive officer Robert Thomson told Reuters. We couldn't agree more.

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It's the biggest purchase made by News Corp. since the Murdoch publishing assets were separated from the TV, movie and news and sports cable businesses last year.

Getting back to life at the palatial penthouse, Mr. Murdoch divorced 45-year-old wife No. 3, Wendi Deng, last year in a less than amicable split (there were accusations that she got a lot closer to former British prime minister Tony Blair than required by protocol) after 14 years of marriage.

Now, he is going to the altar with a romance publisher famous for its optimistic endings and faith in the traditional institutions. It's a match made in heaven.

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About the Author
Senior Economics Writer and Global Markets Columnist

Brian Milner is a senior economics writer and global markets columnist. In a long career at The Globe and Mail, he has covered diverse business beats, including international trade, the automotive industry, media, debt markets, banking and the business side of sports. More


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