CanWest expands content empire with deal to purchase major Hollinger papers

CanWest Global Ltd’s takeover of Canada’s largest newspaper chain should sail through with virtually no scrutiny, senior political sources in Ottawa say. The Canadian Competition Bureau is obliged to look at the deal between CanWest and Conrad Black’s Hollinger Corporation, but only in terms of whether the agreement further restricts competition in the newspaper industry. It will not address the issue of media cross-ownership, a major fear of Canadian nationalists in the 1960s and ’70s. With "media convergence" the buzzword of this decade, there’s little stomach among politicians to try to stop CanWest from becoming an integrated media company. Fast FactsIn fiscal 1999 CanWest’s net earnings were $146 million. Revenue totaled $882 million and operating profits (EBITDA) were $264 million. CanWest has television broadcasting interests in Canada, Australia, New Zealand and Ireland. Global Television has 11 television stations in eight provinces, and reaches 88% of English-speaking Canada. In addition to the Global-branded stations, CanWest owns and operates the independent TV stations CHCH Hamilton and CHEK Victoria, as well as the CBC affiliate stations CHBC in Kelowna, British Columbia and CKRD in Red Deer, Alberta. CanWest owns interests in the specialty cable channels Prime TV and ROBTv. CanWest’s radio broadcasting interests - More FM and RadioWorks are in New Zealand. CanWest owns a film and TV production division, CanWest Entertainment. One of its subsidiaries, Toronto-based Fireworks Entertainment, finances, develops, produces and distributes film and television programs. Fireworks Pictures is a feature film distribution company headquartered in Los Angeles, and Fireworks Entertainment International is a worldwide TV program distributor based in London, England. CanWest’s Interactive division has investments in Internet content providers in Canada (Medbroadcast Corporation) and in the U.S. (Internet Broadcasting Systems and LifeServ Corporation).The deal gives CanWest control of daily newspapers in every major market in Canada. In most cities, the newspapers are either the sole daily or the largest publication. CanWest also gains control of InfoMart Online, a huge database of Southam Inc newspapers articles that rivals the profitable InfoGlobe service run by Thomson Newspapers. "This merger is the ultimate convergence transaction," CanWest chair Izzy Asper proclaimed at a press conference. "What we have accomplished with this move is a perfect marriage between what some call the old media and the so-called new media." Plans are already in the works to soothe any worries that the CRTC may have about the deal. But CRTC spokesperson Denis Carmel says the regulator doesn’t have a mandate to look at the changes to CanWest until the network’s licence comes up for renewal next year. The company says it has asked for a meeting with CRTC officials to talk about the best ways "to ensure that the public interest is protected, while not foregoing achievement of the corporate efficiencies of this media transaction." In its press release announcing the deal, CanWest said it will try to reassure the CRTC that the transaction won’t diminish the diversity of "Canadian voices, choices and editorial opinion." CanWest may also have to contend with the results of a study of Canadian media proposed by Heritage minister Sheila Copps. She announced the consultation last winter, but the importance placed on it may be measured by the fact that its mandate hasn’t been set and commissioners have not been appointed. "This transaction has no bearing on the exercise that has been in the plans for some months," says Copp’s spokesperson Jacques Lefebvre. The Council of Canadians, which also opposed several of Black’s newspaper chain acquisitions, has come out against the CanWest-Hollinger deal. "There’s a role for the federal government in regulating," says John Urquhart, spokesperson for the council. "Under the Competition Act, we have no input into whether this is a good deal or a bad deal, so our government ought to be looking very seriously at this," Urquhart says. Still, opposition to the deal has been fairly mute. The Friends of Canadian Broadcasting haven’t taken a stand on the issue, and the few federal Opposition politicians who were in Ottawa in early August either supported the deal or only went so far as to ask that the Competition Bureau take a hard look at it. "You can’t survive in this world without a multimedia platform," Leonard Asper, president/CEO of CanWest, said at the news conference. The new company is now "a very significant promotion machine" for journalists who will now be able to create stories for different media outlets." CanWest, which is doubling in size as a result of the transaction, is taking on debt to pay Hollinger $2.2 billion in cash. The remainder of the purchase price is comprised of $600 million worth of non-voting shares and multiple voting shares, and a 10-year, $700-million subordinated debenture being taken back by Hollinger Inc. Hollinger also gets six per cent of CanWest’s shares and two seats on the board. Leonard Asper says the debt will be paid down within the next two years. "Over the past few years, we have been clear that we want to get into the content business," he said. "We want to be owners, not renters." He described CanWest’s strategy as building "a massive content creation, distribution and storage machine" that can provide the company’s television stations, newspapers and Internet sites with an unrivaled storehouse of news, sports and entertainment. "I don’t care how its gets into people’s homes," he said. "When it gets there, I just want to make sure it’s our content." CanWest’s content holdings are poised to grow even further, pending the outcome of the CRTC’s current hearing into new digital specialty channel. CanWest has filed applications for 36 new channels. The company tried unsuccessfully to buy The Sports Network last year and is keen on acquiring CTV Inc’s Sportsnet. CTV must sell the sports channel by March of next year following the acquisition of NetStar Communications Inc and its top property, TSN. CanWest ends its fiscal year at the end of this month with a balance sheet that looks radically different from the previous one. In the span of a month and prior to this deal, it has also been granted permission by the CRTC to become a national broadcasting network through the acquisition of WIC’s TV stations in western Canada. Leonard Asper says the rest of the year should see a flurry of further deals. CanWest is still considering buying the Winnipeg Free Press and four small dailies in northwestern Ontario and Manitoba from Thomson Corp. Media watchers say the Kingston Whig Standard and a string of small Hollinger dailies in eastern Ontario were kept out of the CanWest deal to allow CanWest to buy the Free Press, and still be no larger than Hollinger. That may be an important political decision when the CRTC reviews CanWest’s broadcast licence. The eastern Ontario papers are expected to be sold as a new small chain to a Hollinger executive. The deal involved 200 publications, including a string of urban dailies and a 50-per-cent interest in the National Post. While content remains CanWest’s top priority, the Toronto Blue Jays and the Montreal Canadiens are a growing interest, especially when merchandizing and promotional tie-ins are considered. "We do see some merit in the argument that says why pay significant amounts of money for the rights to teams every couple of years when you can buy the team for less money," Leonard Asper said. Analysts expect Telus Corp is the most likely partner for a CanWest telecommunications deal that would provide a platform for the company’s content providers. The Burnaby,BC-based telco is keen on strengthening its ties with broadcasters and content providers.

CanWest expands content empire with deal to purchase major Hollinger papers

Broadcast | August 17, 2000

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