Canwest Global Communications has struck a deal that will see Global TV, Canada’s second-largest private television network, and a handful of lucrative specialty channels move under the control of Western Canadian cable giant Shaw Communications.
Calgary-based Shaw, owner of Shaw Cable and the Shaw Direct satellite TV service, has arranged to buy control of the broadcasting assets of a restructured Canwest Global Communications Corp. It has also agreed to help Canwest pay back creditors as it restructures to deal with a mountain of debt.
While a price tag hasn’t been attached to the deal, some industry observers expect Shaw to have negotiated a discount, considering that Canwest has been struggling to restructure its operations, which also include a stable of daily newspapers slated to be sold separately.
Jim Shaw, president and CEO of the diversified communications company founded by his father J.R. Shaw, issued a statement that the restructuring will result in Canwest as a "pure play" Canadian broadcaster.
"We are excited about the investment and gaining effective control of one of the premier broadcasters and owners of content in the Canadian broadcasting industry at a reasonable valuation," Shaw said.
"We believe that Shaw’s investment results in a number of benefits to the broadcasting system, including an ability to strengthen local programming, ensure the ongoing viability of the second-largest private conventional television network in Canada and sustain a dynamic and competitive television market."
Shaw Communications Corp. would own at least 20% of Canwest’s equity and 80% of its voting stock after the deal. Canwest would remain a standalone company with its own board of directors and its own management team.
Shaw’s announcement said financial terms of the deal would be filed with Ontario Superior Court on a confidential basis and remain so until court approval is obtained. Both companies will meet in court next Friday to flesh out some of the details.
Desjardins Securities said Shaw’s investment in media could be "slightly negative" for Shaw shareholders.
"Given the abundance of English-language content available to Canadians, both from domestic and international sources, we do not believe Canwest provides Shaw with the same content benefits that Quebecor is provided with by its unique French-language media properties, which are in contrast relatively scarce," said a Desjardins note.
"We would have preferred Shaw to concentrate on its plans to deploy a new wireless network in western Canada rather than buy into a media business."
The president of Shaw said that the proposed takeover is more than just a play for broadcast TV assets, but also a move to bulk up Shaw’s content holdings ahead of a shift into the mobile phone market.
"We’re going to be launching a wireless product in the next while and having content available for those customers that come to Shaw, we think would have some value," Peter Bissonnette said in an interview.
"The ownership of content, particularly as we go into broadband wireless applications… we think that content is going to be ever-more important."
He also said that Shaw is looking to gain the rights to more video-on-demand content for its cable subscribers.
Canwest also owns a major chain of Canadian newspapers–including the National Post, Montreal Gazette and Ottawa Citizen–which are not part of the Shaw deal and are expected to be sold before the restructuring under court protection is completed.
Bissonnette said the newspapers were never an asset that Shaw was interested in picking up.
Winnipeg-based Canwest, which owes billions of dollars to creditors, has been operating under court supervision since last year. More recently, it put the newspapers up for sale in a separate but related court-supervised process.
Canwest said the proposed deal with Shaw has the support of key creditors.
Canwest’s chairman Derek Burney, said the company is "very pleased" with Shaw’s commitment and with support it has received from the group known as the ad hoc committee of creditors.
"While there is much work still to be done, Shaw’s commitment represents an important step towards a successful financial restructuring of Canwest and is supported by the company and the members of the ad hoc committee," Burney said in a statement.
Sunni Boot, president and CEO of ZenithOptimedia Canada, said the sale is a positive move because it will give Canwest some financial stability from an owner who is both respectful and knowledgeable in the broadcast business, and hopes Shaw will resist widespread change.
"The ownership is great and [they should] keep those Canwest assets together with the Canwest sales force," she said. "Those assets and sales force are among the best in our industry. I’m probably naive in assuming a lot of it will be kept, but if they can it’s a win-win combination."
The deal also brings together two parties on either side of the recent CRTC broadcast fee-for-carriage hearings. Jim Shaw has been a vocal opponent of fee for carriage, while Global has maintained that Canadian cable and satellite companies should pay broadcasters a fee to distribute their signals.
