Friday July 14, 2017

How Canada's book publisher McClelland & Stewart became German-owned: author

Investigative journalist Elaine Dewar's book The Handover shares the story of how McClelland & Stewart came to be owned by a German company despite Canada's national ownership rules.

Investigative journalist Elaine Dewar's book The Handover shares the story of how McClelland & Stewart came to be owned by a German company despite Canada's national ownership rules. (Danielle Dewar)

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Alice Munro. Margaret Atwood. Michael Ondaatje. Mordecai Richler.

It's hard to imagine Canada without these writers. And many of their best works were published by the venerable McClelland & Stewart.

Founded in 1906, McClelland & Stewart published some of the most important writers in Canada. And it was supposed to be protected by strict national ownership rules. 

"A country without a literature is not a country," says Elaine Dewar, author of The Handover: How Bigwigs and Bureaucrats Transferred Canada's Best Publisher and the Best Part of Our Literary Heritage to a Foreign Multinational

Dewar, an investigative journalist, tells the story of how McClelland & Stewart came to be owned by a German media conglomerate, Bertelsmann.

It's an important story, she argues, because of M&S's impressive "backlist" (older books still under copyright by the publisher).

ORDER OF CANADA

Publisher Jack McClelland is congratulated by Governor General Adrienne Clarkson after receiving the Order of Canada, May 31, 2001. McClelland sold the publishing house McClelland & Stewart in 1985 to a developer named Avie Bennett, who ran the company for 15 years. (Tom Hanson/CP)

"Without M&S, we would not have the early works of Leonard Cohen, of Mordecai Richler, of Mavis Gallant, of Alice Munro," Dewar says.

"It created a place for Canadians to talk to each other."

In 1985, Jack McClelland sold McClelland & Stewart to a developer named Avie Bennett, who ran the company for 15 years. Bennett decided to get out of the book business in the late 1990s, when he realized that online book sales would change everything. 

"Avie put his heart and soul into it for 15 years, put a lot of money into it for 15 years and there was no exit," says Dewar.

"His problem was — I've taken on this company, I'm 72-years-old, my kids don't want it, what do I do with it now? His answer was — give it to the competitor, get a good price."

So in 2000, Avie Bennett sold one-quarter of McClelland & Stewart to Random House Canada, owned then and now by Bertelsmann; he donated the other three-quarters as a charitable contribution to the University of Toronto. 

Bennett received a $15.9 million tax credit for the donation, and majority ownership stayed with a Canadian entity.

It amounted to a foreign takeover, Dewar says. 

The Handover Jacket

(Published by Biblioasis )

But Random House of Canada (now Penguin Random House of Canada) disputes that.  

In a written statement to The Current, Brad Martin, resident and CEO of Penguin Random House Canada, says that the company's purchase of McClelland & Stewart did not violate Canadian ownership rules. 

"McClelland & Stewart was managed by a Board that was chaired by Avie Bennett and included two directors from the University of Toronto, two independent directors appointed by Avie Bennett, and two directors from Random House of Canada," writes Martin.

"The Board had complete control of M&S from the beginning of the new ownership arrangement. This arrangement was consistent with the regulations governing ownership of Canadian companies in cultural industries."

A University of Toronto spokesperson told The Current the university was "very proud to be a steward of the company during a difficult time for the industry." 

In 2011, U of T sold its shares of McClelland & Stewart to Random House for $1, and today, it is entirely owned by the German company.

Canadian Heritage Minister Mélanie Joly's office sent this statement:

"Our government is committed to ensuring that foreign investments in Canada's cultural sector benefit Canadians and respect Canadian laws. Due to the confidentiality provisions contained in the Investment Canada Act, no further information can be provided on specific cases."

Listen to the full conversation at the top of this web post.

This segment was produced by The Current's Kristin Nelson.