Astral’s Standard acquisition the right move, could trigger more radio deals

Canadian media companies seem determined to get deals done before the CRTC reviews questions of ownership concentration and diversity of voices later this year. The most recent big-ticket purchase is Astral Media Inc.'s $1.08-billion offer for Standard Radio Inc., announced yesterday."Today, we're announcing the birth of a new national leader in Canadian radio, a leader that will be the largest and best group of radio stations in Canada, a radio group with revenues in excess of $325 million coming from stations located in all regions of our country and covering every metropolitan market in Canada," said Astral president and CEO Ian Greenberg during a conference call discussing the details of his firm's bid.The $1.08-billion deal breaks down to $880 million in cash, with the balance coming from issuance of 4.75 million class A non-voting shares in Astral. According to Astral, the acquisition will make them the most-listened-to national radio player with a 31% share of countrywide tuning hours, compared with Corus Entertainment Inc.'s 28%, Rogers Communications Inc.'s 14% and CHUM Ltd.'s 11%.The deal will include 52 AM and FM stations in 29 markets, spanning five provinces, as well as Standard's national ad sales firm Integrated Media Sales, radio content provider Sound Source Networks, elements of Standard Interactive, and two CBC affiliate television stations in northern British Columbia.Standard, meanwhile, will retain its stake in the Sirius Canada satellite radio service and its online streaming audio service Iceberg Radio.com, which is part of the Standard Interactive division. Standard's president and CEO Gary Slaight, who will also join Astral's board, says he expects the paperwork to be filed with the commission in the next two to three weeks, with a hearing sometime in the fall and a decision hopefully by year's-end or early 2008.While competition in local markets and concentration of ownership have been concerns in the two other big merger announcements over the past year -- CTV globemedia's pending $1.7-billion acquisition of CHUM, and Rogers' more recent offer of $137.5 million for select CHUM assets -- it's not likely to be a big factor in the Astral-Standard deal."French-language radio is not considered competitive to English-language radio, therefore there are no conflicts anywhere in the country, including Montreal," Greenberg noted. "As a matter of fact BBM and Nielsen consider Montreal two markets -- one anglo and one franco -- and the Competition Bureau looks at markets also by language."Peter Fleming, president of Peter Fleming Consulting, agrees. "Astral isn't really big in English-language radio -- they have a few stations down here in the Maritimes, but that's all," he says. Standard, on the other hand, has strength especially in Edmonton and Calgary -- the latter one of the fatest-growing radio markets in Canada -- according to a spring BBM ratings analysis put out by Carl Bayard, media analyst at Desjardins Securities Inc., earlier this week."Standard is a very well-run company with very good people, so I would think they would be very well advised to make sure that they keep those people and listen to them," Fleming says.The big question remaining, then, is: with an acquisition of the entire CHUM Ltd. empire in the works, will CTV globemedia decide that it wants to be in the radio business, or focus on its strengths in broadband content and conventional and specialty television?A valuation report prepared by Merrill Lynch Canada on behalf of CTV globemedia reviewed six other acquisitions in Canadian radio since 1999 and pegged the fair market value of CHUM Radio's assets at between $486 million and $637 million.Bayard says "it's a definite possibility" that some of CHUM's radio properties will be in play once the company is absorbed into the CTV globemedia organization, and once Astral's deal with Standard is concluded."I know that there are some markets where they only have one station," Bayard points out. "Would it make more sense to sell that station to someone who happens to operate in that same market already? Of course."But while Astral had shown interest in CHUM's holdings in the past -- its bid for CHUM was rejected in favour of CTV's last summer -- Greenberg says the company likely won't be a potential buyer for any CHUM Radio assets going up on the block in the future. Although he says he's delighted to now own 100% of MusiquePlus and MusiMax, "there were assets , we took a peripheral look at them, but frankly they didn't fit our portfolio."That doesn't necessarily rule out more acquisitions for Astral, Greenberg added. "I think people have come to the conclusion that Astral is a buyer, not a seller," he said. "One never knows -- certain companies six months ago were not for sale, and then they become available for sale." While no other opportunities present themselves at present, Greenberg said he plans to grow the company in all three of its core businesses: radio, specialty television, and out-of-home advertising.And although it's bumped to number-two status in the national radio market, Corus shouldn't be ruled out as a potential buyer of radio assets in the near future. After retiring debt and buying back shares in its 2006 fiscal year, "if anything they're underlevered right now," notes Bayard, meaning more latitude in raising funds and releasing shares in order to pay for future acquisitions.The window for acquisitions and mergers under the current policy may be closing fast, however: the day after Astral and Standard made their joint announcement, the CRTC launched a review of "the diversity of voices in the Canadian broadcasting system." That process will weigh such issues as concentration of ownership, horizontal integration of media properties, licence trafficking, and ensuring the diversity of Canada's population is represented in broadcasting, among others.Comments on the proceeding are due on July 18, and a hearing gets underway on September 17. Canadian Communications Reports will have more on that story in the weeks to come.

Astral’s Standard acquisition the right move, could trigger more radio deals

News | 04/13/2007 7:42 pm EDT

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