BUSINESS/ECONOMY

A media giant enters America

Bruce Wallace March 25 1985
BUSINESS/ECONOMY

A media giant enters America

Bruce Wallace March 25 1985

A media giant enters America

BUSINESS/ECONOMY

Bruce Wallace

Early every weekday morning Pierre Péladeau, businessman, publisher and socialite, climbs into the back seat of a chauffeur-driven Mercedes outside his home in the Laurentian Mountains community of Ste. Adèle. During the 80-km trip to his Montreal office, the maverick founder and chief executive of Quebecor Inc., a $140-million printing and publishing giant, pores over his company’s flagship publication—the Journal de Montreal Currently Canada’s second-largest daily with 330,000 readers, the Journal was known in the past for its steady diet of sex, sin and scandal. But in the past five years Péladeau has toned down the paper’s garishness—and gained readers and respectability. Said a Journal staffer: “With higher profits has come an editorial policy that we can no longer run pictures of dead bodies.”

Péladeau’s reputation in the Montreal business community has undergone a similar transformation. Once coldshouldered by the establishment for his freewheeling lifestyle and lavish parties, Péladeau has emerged as a major business force, aggressively guiding

Quebecor to record profits of $11.4 million last year. Said David Schulman, director of investment research with Geoffrion Leclerc Inc. in Montreal: “Péladeau has reformed. He is now only 90 yards from the mainstream of conventionality instead of 100.”

Indeed, the Journal’s success is matched by the overall growth at Quebecor, the newspaper’s corporate parent founded by Péladeau in 1965. In addition to the Journal, Quebecor owns daily

papers in Quebec City and Winnipeg, 32 regional weeklies and a booming printing and publishing business which has left it cash wealthy and searching for new investments. Revenue for 1984 rose 26 per cent to a record $279 million, spurred by a 31-per-cent jump in revenues from the printing division. Said André Lemire, the senior vice-president of research at Montreal-based Levesque Beaubien Inc.: “He has a hot newspaper sitting on top of an industry with great economic momentum.”

Péladeau’s appetite for expansion is voracious. For one thing, he is building a new $18-million printing plant in Montreal for the Journal. In the past the paper was often forced to turn down advertising because of lack of space (on one occasion it had to refuse 17 full-page

ads). The new plant will enable the Journal to expand to 162 pages from 128. As well, to increase Quebecor’s vertical integration—its ability to produce the entire product independently—Péladeau is planning to buy a paper mill. But Péladeau’s main area of expansion will be in the United States.

In January he announced that Quebecor had purchased 60 per cent of Pendall Printing Inc. of Midland, Mich., as the first step in a bold plan of new acquisi-

tions. In the near future, he said, he plans to buy two more printing plants in the United States and a number of weekly newspapers. Critics claim that Péladeau is overly fascinated by the prestige that comes with owning American dailies, but he denies that is the main reason for his southern expansion. Said Péladeau: “There are simply no good markets left in Canada.”

Péladeau’s aggressive plans reflect his strong recovery from an $11.6-million loss that he suffered during four years as the owner and publisher of the Philadelphia Journal. Péladeau closed the paper in 1981 after waging a losing battle to capture circulation and advertisers from the paper’s three established rivals. Péladeau said that the newspaper’s “sports and more sports”

formula increased circulation gradually to 125,000, but advertising revenue did not keep pace. “It was costing me a fortune to print the thing,” he declared. “[The loss] was my own error, but I have learned my lesson and I will apply that lesson.”

Péladeau, 59, has been involved in publishing for nearly 35 years. It began when he left his job as a reporter at the Montreal-based Le Canada and borrowed $1,500 from his mother to start the Journal de Rosemont, a community weekly. Within five years he had bought four more weeklies, but he encountered problems getting his French-language papers printed quickly and accurately at an English-language printing shop. He then negotiated a $21,000 loan from his future father-in-law to set up his own printing business in Montreal’s east end. Péladeau quickly displayed a talent for innovative business methods. His Montreal Offset Printing Inc., founded in 1962, was one of the first plants in North America to adopt the offset technology that now dominates the industry.

But as his printing business grew, Péladeau said, his dream was to own a daily newspaper. When employees at La Presse, Montreal’s largest daily, walked off the job on Friday, June 12, 1964, Péladeau was prepared—the first issue of the tabloid-sized Journal de Montréal, which originally had been planned for the fall, was on the streets by Monday. During the six-month La Presse strike, the Journal's formula of sports and crime quickly carved a niche in the fiercely competitive Montreal newspaper market, which at the time was already served by four other French-language and two English dailies. Twenty-one years later the Journal has usurped the position of La Presse as North America’s largest French-language daily.

The Montreal business establishment has been slow to accept Péladeau. He still insists that Montreal investment firms recommended an “outrageously low” price for Quebecor shares when he tried to take the company public in the early 1970s. Said Péladeau: “It was sheer ignorance. I don’t provide charity.” As a result, he turned to E.F. Hutton, a New York-based investment dealer, to arrange a listing of Quebecor shares on the American Stock Exchange in New York. The slight left Péladeau with an aversion for Montreal’s business leaders, and he has rejected offers of other corporate directorships. Said Péladeau: “The establishment needs me more than I need it. I have turned down a hell of a lot of offers to sit on boards.”

Péladeau says that his outsider image occasionally has worked to his advantage. He adds that it made it easier for him to admit to a “slight drinking prob-

lem” several years ago. He is regarded as a moderate nationalist who supported the Oui side in the 1980 referendum on sovereignty-association, and he also considers himself a good friend of Prime Minister Brian Mulroney. Indeed, Péladeau says that both Mulroney and René Lévesque once worked for him. Mulroney, as a labor lawyer, helped negotiate the first labor contract at the Journal, while Lévesque wrote a political column for the newspaper before be-

coming premier in 1976.

The Toronto business community was even slower to accept Péladeau. Although its stock has traded on the American Stock Exchange since 1972, Quebecor was not even listed with the Toronto Stock Exchange (TSE) until 1983. Some industry observers contend

that Bay Street was slow to accept Péladeau because of his maverick image. Quebecor stock is now among the most bullish on the TSE, a significant breakthrough. Péladeau told Maclean's: “If they do not want to make money with me, that is their business.”

Investor enthusiasm for Quebecor is growing because Péladeau has moved to eliminate major concerns about his management style. In the past, his pervasive involvement in all phases of the business led to investor worries about who would eventually succeed him. Péladeau still owns 54 per cent of Quebecor but he has turned over a large part of day-to-day operations to professional managers. But delegation has also led to major mistakes. In 1983 the company invested $1.1 million for five per cent of First Choice pay television, a stake that dropped to two-to-three per cent when it reorganized last year. Explained Péladeau: “That decision was made by other executives against my best impulses.”

Still, investment analysts welcome the new managerial style. Said Lemire: “The concept of Quebecor being a oneman show is changing by default. Péladeau now needs a bigger team.” Added Lemire: “To keep momentum Péladeau must continue to cultivate a pan-Canadian image.” To that end, Péladeau is determined to stick with the money-losing Winnipeg Sun, a tabloid that he purchased in 1983, and he claims that the paper will show a profit by September, 1986. But his patience with lossprone ventures is limited. In January Péladeau closed the Montreal Sunday Express, an English Sunday paper estimated to have lóst $250,000 last year.

As well, Péladeau insists that he will not let close the prestigious Le Devoir, the intellectually oriented daily printed and distributed by Quebecor. Although there have been repeated rumors that plummeting circulation—it has dropped 20 per cent in the past four years, to 32,500—and falling ad revenue would force the closure of the newspaper, Péladeau insisted: “Le Devoir is an important institution, and I would not let it close.”

New ventures, such as an all-sports daily, still tempt him, but Péladeau said that business is no longer an all-consuming passion. “If you miss a deal, there will always be another,” he said. He now spends more time at his home in Ste. Adèle with his wife, Lynn, where he swims laps in his indoor pool every night. Declared the publisher: “Of all the investments I ever made, moving to the country was the best.” But observers believe that Péladeau still retains the capacity to shake up the industry. Said Schulman: “He has been long ignored and long underrated, but he may well have just begun to fight.”^