ASTRAL MEDIA SET TO BROADCAST COAST TO COAST Grant Robertson – Globe and Mail A Canadian radio giant is about to be born after months of negotiations produced a deal that will see Astral Media Inc. swallow Standard Broadcasting Corp. Ltd.
The deal, which would create the country's largest network of commercial stations, is not yet final but is expected to carry a price tag of about $1.2-billion. It must clear regulatory approval and a close examination of Standard's financial books by executives at Astral.
Once the two networks are combined, Montreal-based Astral will emerge with 81 AM and FM stations covering most of the country. It will be well ahead of the next-largest player, Calgary-based Corus Entertainment Inc., which has 50 commercial stations.
It is the third billion-dollar takeover in Canada's broadcasting sector in the past seven months, and may signal the end of a frantic round of media consolidation that began last summer.
Astral has signed a letter of intent to purchase "substantially all of the assets" held by Standard, which also holds a radio advertising sales company and several Internet properties. Standard's 40-per-cent stake in Sirius Canada satellite radio is not part of the deal.
While Astral is certain to acquire all of Standard's 52 commercial radio stations, the company's interest in some of the other assets is still being negotiated, sources close to the deal said.
The agreement comes after months of speculation that Astral and Standard were in talks.
Toronto's Slaight family, which controls Standard, signalled last April they were willing to discuss a sale after attempting an income trust conversion that was later cancelled amid slumping stock markets. However, the Slaights have been reluctant sellers. Though interested in cashing out on some of their investment for estate planning purposes, the family only grudgingly entertained the idea of an outright sale after the income trust option disappeared.
"We are selling for personal reasons," Standard chief executive officer Gary Slaight said after the deal was announced. "We like Astral as a company who will take care of our employees . . . and share our vision."
In acquiring Standard, Astral would inherit some of the most lucrative radio stations in Canada. Alongside rivals such as Corus and Rogers Communications Inc., Standard's FM stations in several of Canada's major cities boast some of the best operating margins in the business. The list of names includes Toronto's EZ Rock and The Mix, Calgary's CJAY 92 and Edmonton's The Bear.
The deal comes on the heels of CTVglobemedia Inc.'s agreement in July to buy CHUM Ltd. for $1.4-billion. That was followed last month by a second blockbuster, when Alliance Atlantis Communications Inc. was sold for $2.3-billion to CanWest Global Communications Corp., which partnered with U.S. banker Goldman Sachs & Co.
Astral, which is debt-free and amasses a cash stockpile of more than $100-million each year through radio and TV operations, operates mostly in Quebec and the Atlantic provinces. It has been looking for a deal that would allow it to grow in the rest of Canada.
Much like Standard, Astral is controlled by a well-known media family — the Greenbergs — and negotiations on the Astral deal came down to talks between two venerable industry heavyweights that have known each other for decades.
Astral CEO Ian Greenberg had coveted CHUM, but lost out in the bidding to CTVglobemedia, which owns the CTV network and The Globe and Mail. The company was also interested in buying pieces of Alliance Atlantis, but balked at the price CanWest paid.
"Ian Greenberg has always been a very disciplined acquirer," said Carl Bayard, an analyst at Desjardins Securities in Montreal. "With Standard, they really become the leader in radio in Canada. They become a national player."
Astral plans to pay for 80 per cent of the purchase with cash and the remaining 20 per cent with its class A shares.
Though Astral shares dipped nearly 4 per cent yesterday as rumours of a deal swirled, the company's stock rose as high as $46.88 last month on speculation the firm would look to do a deal in the wake of the Alliance sale. In addition to a deal with Standard, observers thought Astral may look at a merger with Corus Entertainment.
"With the acquisition of Standard Radio, Astral Media will not only be acquiring the best-performing radio stations in the country, we will at the same time acquire a company with similar values and culture," Mr. Greenberg said.
A large Astral shareholder said the acquisition is welcome, since it turns the Quebec firm into a formidable presence in Canadian radio.
"Looking at the big picture, it would be good because it would convert Astral from being a regional player into a national player," said Anil Tahiliani, head of research at McLean and Partners Wealth Management Ltd. in Calgary.
"There's not many opportunities in Canada to do that."
Analysts said the deal makes sense, particularly since there are few regulatory concerns that would be raised. Federal rules restrict companies to owning no more than two FM stations and two AM stations in a single market. Astral and Standard have very little overlap in the radio stations they own. |