CTV ponies up again in Phase III

CTV Inc. defused some of the criticism of its bid to buy CHUM Ltd. this morning by agreeing to increase by 50% the benefits it will have to pay for acquiring the CityTV chain of stations.Related storiesCTV sweetens offer to sell regulators on CHUM dealFriends in high places: CTV replies to interventionsCTV/CHUM deal "would destroy" common ownership policy: MorrisonRogers to pay $137.5 for select CHUM assets"Some interveners suggested that we should pay a 15% benefit for the twin sticks," CTV CEO and CTV globemedia president and CEO Ivan Fecan said, referring to the CRTC's prohibition on broadcasters owning two conventional stations in the same market. "We will agree to this, but the 15% should be calculated on the value of the CityTV stations," and not the whole deal, he added.Under the 1999 conventional television policy, broadcaster consolidation triggers a minimum 10% benefit based on the gross value of the deal. In several past instances - notably CanWest Global Communications Corp.'s purchase of WIC Western International Communications in 2000 and CHUM's acquisition of Vancouver station CKVU a year later - the regulator agreed to packages that exceed the 10% guideline.Another sticking point for those intervening in opposition was whether corporate debt should be included in the value of the transaction. Here again, CTV acquiesced - a move that will add another $20.4 million to the benefits payable for a total of $123.9 million, up from the earlier $103.5 million.To the very last, the commissioners tried to get CTV to reconsider its proposal to keep CHUM's City properties and divest its A-Channel stations to Rogers Communications Inc., instead arguing that the opposite arrangement would more easily pass regulatory muster.But Fecan countered by observing that no other broadcasting industry player has the bankroll necessary to acquire the most expensive - and audience-garnering - US programming, as well as a track record of supporting and funding Canadian productions. "CTV is offering you certainty," concluded Fecan.Had a better offer for CHUM arisen, the firm's founding Waters family would have been bound by fiduciary duty to accept it, said former chairman Jim Waters. However, he added, "We held our breath, because we wanted CTV, period."In all, the CTV- CHUM camp argued, the proposal was the best possible way to allow the Waters family to exit the broadcasting industry, ensure a competitive broadcasting landscape, and help restore the former "edgy" glory of the CityTV properties, which had been forced to move more toward the mainstream due to market pressures.But yesterday the deal's naysayers took exception to CTV's portrayal of CHUM as struggling and in need of rescue. Chief among them was CBC Television executive VP Richard Stursberg."CHUM is not a company that was financially distressed in any way," Stursberg said, pointing to the 50% premium CTV offered for the broadcaster's common shares as evidence that there is still ample value left in CHUM.Stursberg also rejected the idea that appropriate safeguards could be put in place to prevent CTV from exerting undue influence over the entire broadcasting system. "Why would the commission want to create a behemoth only to have to forge a set of chains to ensure it doesn't wreak havoc on the Canadian broadcasting system?" he asked.Stephen Waddell, national executive director of the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), urged the commission to re-impose minimum annual programming expenditures and commitments to air Canadian drama in prime time on broadcasters, two policies that were abandoned with the 1999 television policy."We do not accept that the proposed benefits in this transaction are any substitute whatsoever for regulation" binding CTV and CHUM to expenditure and exhibition minimums, he said.Waddell also pressed the commission to increase the benefit payable from 10% to 15% and include corporate debt in its calculation, as a penalty for "breaking" the twin-stick rule, an idea that CRTC chair Konrad von Finckenstein took umbrage with."You seem to be saying you can buy an exception for an additional premium - that's not the way we do things," von Finckenstein said. Waddell replied: "I appreciate that, but that appears to be the way it's going."However, CTV's proposal also had much support from the production side as well. "The bottom line is the Waters family wanted to sell, and CTVglobemedia was probably the best buyer," Writers Guild of Canada executive director Maureen Parker told the commission.While she said the guild is sensitive to broadcasters' needs to consolidate in the face of competition from media sources not beholden to Canadian regulation, deals such as the CTV-CHUM one need to be structured to maximize public benefit. Like ACTRA's Waddell, Parker urged the commission to increase the benefits package to 15% of the value of the deal, and joined the Directors Guild of Canada in calling for corporate debt to be included when calculating that value.Both guilds also suggested that currently mandated Canadian programming expenditures be blended and used as a starting point for calculating the incremental benefits triggered by the deal. Commissioner Stuart Langford questioned the fairness of this concept though. "Are you tied to this?" he asked."Oh, I'm completely tied to it," replied Parker.The Canadian Film and Television Production Association echoed earlier calls to increase the benefits package ensuing from the deal, but added a caveat of their own: that CTV's "zero-overlap" commitment be extended to the new entity's specialty channels, not just its conventional television assets.That was a suggestion that Fecan, in his Phase III reply, roundly rejected. "This presupposes unlimited money," he said. "We can't accept this proposal."Like the WGC and DGC, the CFTPA said it's not opposed to broadcaster consolidation on principle - a de facto statement of support for the CTV proposal - but expects that the maximum public benefit be negotiated each time.CTV's improved offer - amendments on May 2Increase 10% minimum benefit to 15% for value of CityTV stations only (additional $6.5M)Include corporate debt in calculation of total value of dealAdditional 2.5 hours/week of local programming in Edmonton, Calgary and WinnipegCondition of licence guaranteeing separate news management and presentation functions, but not news gatheringCondition of licence guaranteeing zero overlap in programming between CTV and CHUM on an annual basisCondition of licence guaranteeing that 75% of Canadian programming expenditures will go to independent producersCondition of licence to devote 8 hours/week of CityTV Toronto's prime time schedule to priority programming (the broadcaster is already informally committed to that level, but DGC charges it's not meeting that commitment)Shorten to three years the period it will take Bell ExpressVu to come into compliance with 5:1 carriage ratio of unrelated to related Category-2 specialty services

CTV ponies up again in Phase III

News | 05/02/2007 7:46 pm EDT

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