A major shift in Canadian television ownership is coming that will fundamentally alter the country’s broadcasting landscape, as Calgary’s Shaw Communications has struck as deal to take over the TV assets of Canwest Global.
Shaw, up until now primarily a cable TV and Internet provider, said Monday it has reached a deal that will see it become the new owner of Canwest’s over-the-air TV stations and specialty cable channels in a series of transactions totalling about $2 billion.
The agreement would give Shaw 11 local Global TV stations across the country, and ownership of a group of specialty channels, including Showcase, MovieTime and HGTV, some of which were acquired from Alliance Atlantis in 2007.
The price tag includes $700 million in cash that Shaw will spend to buy the piece of a key Canwest Global subsidiary currently owned by New York-based investment bank Goldman Sachs.
For Shaw, it means access to a wide range of broadcast content–something in which it has expressed a keen interest as it prepares to also enter the wireless market.
Shaw CEO Jim Shaw said in a statement that his company had conducted extensive negotiations over several months with all the parties involved and said his company is position itself to be a leading Canadian provider of communication services and entertainment.
“We are pleased to announce that we have come to an agreement with all constituent parties involved in a restructured Canwest, including Goldman Sachs, and are excited about the opportunity to acquire the entire company now,” Shaw said.
“The recent restructuring initiatives undertaken by Canwest have positioned it as a pure play Canadian broadcaster and we are excited about this transformative transaction for Shaw as we believe the combination of content with our cable and satellite distribution network, and soon to be wireless service, will position us to be one of the leading entertainment and communications companies in Canada.”
The deal will have “little downside” for Shaw, allowing the company to integrate its distribution capacity with content “in a world where media continues to seek new forms of distribution,” commented debt-rating agency DBRS.
“In addition to bringing a number of benefits to the broadcasting system in Canada, DBRS believes this investment will give Shaw the indirect benefit of being a vertically integrated content and distribution company, with options for the future,” the agency said.
The deal between Shaw and Goldman Sachs clears the way to advance the restructuring of Canwest Global Communications, which is selling its publishing business separately after seeking protection from its creditors as it struggled to deal with a mountain of debt.
Shaw has said it wants only Canwest’s television and specialty cable TV properties while a number of potential buyers have expressed an interest in Canwest’s newspapers, which include the National Post.
The Canwest board and an Ontario bankruptcy judge had previously approved a deal for Shaw to buy at least 20% of Canwest. Shaw’s offer was conditional on reaching a deal between it and Goldman Sachs that was acceptable to Canwest’s creditors and the court.
Shaw said Canwest’s creditors will receive a total of $478 million in cash as a compromise payment on debts amassed by Canwest. Shaw will also assume $815 million of net debt at CW Media Group.
In addition, Shaw will pay $700 million to acquire Goldman Sachs’ equity interest in CW Media Group, which was formed when Canwest teamed with the U.S. investment bank to acquire the Alliance Atlantis specialty TV channels.
Meanwhile, the owner of the Toronto Star says it has entered its bid for the newspaper assets of Canwest.
Torstar Corp. says it submitted a formal offer on Friday, putting to rest speculation that the publisher of Canada’s biggest newspaper was having trouble lining up its financing.
Reports last week suggested that deep-pocketed investment management firm Fairfax Financial, a key shareholder of Torstar, might not be on board with the bid as a financial backer.
But Torstar said it and Fairfax have gone ahead with the offer, and although no financial terms have been disclosed, the banks who effectively own Canwest have set a floor price of $950 million.
Torstar is not the only bidder for the Canwest newspapers, which include the National Post, Montreal Gazette and Ottawa Citizen.
Other reported bidders include Victoria-based David Black and Vancouver’s Glacier Media, which owns many newspapers in B.C. and elsewhere.
Former Canwest CEO Leonard Asper, who lost control of the newspaper and broadcasting company his father built, is also part of a bid to reclaim the papers, once known as the Southam Newspaper Group.
