The CRTC furthers its slide into irrelavence...
CRTC approves CanWest takeover of Alliance Atlantis
Published: Thursday, December 20, 2007 | 6:43 PM ET
Canadian Press: Steve Rennie, THE CANADIAN PRESS
OTTAWA - The federal broadcast regulator has greenlighted CanWest Global Communications' (TSX:CGS) multibillion dollar takeover of one of the country's top entertainment companies amid fears control would stray from Canada onto Wall Street.
Late Thursday afternoon, the CRTC approved the $2.3-billion takeover of Alliance Atlantis Communications (TSX:ACC.B) by CanWest with substantial financial involvement from New York-based Goldman Sachs, one of the world's biggest investment banks (NYSE:GS).
"It was a difficult decision because it was a very complicated deal," CRTC chairman Konrad von Finckenstein said in an interview with The Canadian Press.
"This is a further concentration of the industry and you want to make sure when that happens it's for the benefit of the overall system."
As well, the regulator noted that CanWest pledged to spend $136.6 million on domestic programming, including Canadian drama, documentary productions, and news and public affairs.
The big Winnipeg-based multimedia company also committed $14.6 million toward social and industry initiatives, including mentorship and internship programs, and support for arts and diversity festivals.
Unions and special interest groups had urged the CRTC to either reject the deal, fearful Goldman Sachs would end up calling the shots since it put up 64 per cent of the money to finance the takeover.
One of the few minor changes to the deal was a requirement by the regulator that a majority of CanWest representatives be present to have a quorum, rather than simply a majority of board members.
Still, some were harshly critical of Thursday's decision.
"This is definitely a change in the foreign ownership rules through the backdoor and the CRTC should have had more backbone on this matter than it displayed," said Ian Morrison of the Friends of Canadian Broadcasting.
New Democrat MP Charlie Angus echoed that sentiment.
"It's pretty clear that in the climate with the CRTC, money talks and cultural values walk," he said.
A company spokeswoman said CanWest president and CEO Leonard Asper was getting on an airplane and could not be reached for comment.
But in a statement released late Thursday, Asper said he was pleased by the "timely manner" of the CRTC's decision.
"We thank the management and employees of both companies involved for their patience and hard work during this process and we are looking forward to moving ahead and bringing Alliance Atlantis into the CanWest organization," he said.
A sticking point before the regulator had been whether CanWest will keep sufficient control to meet Canadian ownership rules in the broadcast industry.
The regulator challenged CanWest Global at a two-day hearing last month to ensure that it will retain control of Alliance Atlantis despite putting up only a minority stake. CanWest says it would still control Alliance Atlantis through a majority of the voting shares.
Domestic control of Canadian broadcast companies is required under federal broadcasting rules.
Under the deal, Goldman Sachs will get one-third of the voting shares and 64 per cent of the equity in the acquired broadcaster, including Alliance Atlantis's half interest in the popular CSI television franchise.
Meanwhile, CanWest Global acquires Alliance Atlantis's 13 specialty channels, which include Showcase and HGTV. For television viewers, the transaction will probably mean more cross-promotions on the various TV properties and bulk buying of programs.
Asper told the four-member CRTC panel in November that decisions valued at more than $22 million would also have to be vetted by Goldman Sachs management.
The Canadian Media Guild, which represents more than 100 broadcast operations employees at Alliance Atlantis, said Thursday it fears Goldman Sachs will end up running the company.
"In the end, Goldman Sachs is a major player in the operation of this company. No question about it," guild president Lise Lareau said.
"They have a significant interest in running this company, and they will."
Goldman Sachs can acquire majority ownership of the existing CanWest Global, along with the Alliance Atlantis channels, should the Canadian broadcaster fall short of its debt, cash flow and rate of return financial benchmarks.
Von Finckenstein said CanWest persuaded him and his fellow commissioners the company could meet its performance goals.
"Nobody, of course, has a crystal ball but we think it's realistic that they can meet those (benchmarks) and that they can produce the margins necessary to satisfy Goldman Sachs," he said.
The union representing 21,000 Canadian television industry members was less optimistic.
"It's going to be a challenge for CanWest to meet those benchmarks," said Stephen Waddell, national executive director of ACTRA.
"One wonders whether it's all just smoke and mirrors and in fact the case is that, ultimately, Goldman Sachs is intent upon obtaining actual control of Alliance Atlantis."
CanWest shares have been trading at their lowest level in about four years because the company is heavily indebted and faces increased competition for advertising revenue in some of its key markets.
The multimedia firm - whose holdings include the Global TV network and major city newspapers, including the National Post and the former Southam dailies from Vancouver to Montreal - is currently restructuring and cutting jobs at its some of its television and newspaper properties across Canada.
CanWest shares rose nine cents to $6.32 in Thursday trading on the Toronto stock market in anticipation of the CRTC ruling. The company's shares traded as high as $12.08 earlier this year, but for the most part have steadily fallen in 2007.
Asper told the four-member CRTC panel last month that if CanWest didn't get a green light on the Alliance Atlantis deal it would "accelerate" the ratings decline at the company's conventional television networks.
He also said the broadcaster would likely trim budgets at those networks if the CRTC rejected the deal, triggering the "inevitable deterioration" of Alliance Atlantis.
© The Canadian Press, 2007