GLOBAL TV PROFITS DRIVE DEAL Asper says greatest challenge will be meeting deadline to buy full stake David Friend - Canadian Press The financial performance of CanWest Global Communications Corp.'s Global TV division will play a key role in the company's $2.3 billion acquisition of all of the specialty channels of rival Alliance Atlantis, says CanWest CEO Leonard Asper.
The outcome of its deal, partnering with Wall Street investment bank Goldman Sachs Capital to buy Alliance, leans strongly on the financial performance of CanWest's broadcasting assets.
When the deadline approaches, CanWest and Goldman will divide the shares of the new company according to the operation's overall performance – which means high profits will be crucial for the deal to work in CanWest's favour. If profits aren't strong, CanWest could risk holding less than half of the company.
Asper told a news conference yesterday the greatest challenge for CanWest will be meeting the deadline to buy the full stake in Alliance Atlantis's 13 specialty channels.
But he played down the performance issue: "We have that risk today anyway.
"We put it all on our shoulders to perform," he said, adding that acquiring the specialty channels "enhances the likelihood Global will perform better."
The acquisition is to be completed by the summer through a new subsidiary company owned by CanWest, pending approval by shareholders and federal regulators.
Asper said the deal was shifted to a subsidiary to avoid it having a direct impact on CanWest, giving the debt-laden parent company more financial flexibility.
"If we were going to borrow money, we wanted the borrowing to be in the subsidiary company, not at the CanWest parent level," he said, an approach that allows "maximum flexibility to do whatever we want in our asset groups."
CanWest loaded up on debt in the wake of buying newspaper assets from Conrad Black's former Hollinger empire for more than $3 billion in 2000. Since then the company has been actively reducing its debt by selling off assets and making other financial moves.
"With our balance sheet, we could not write a $1.5 billion cheque," Asper said. "But we do have a lot more flexibility than we had three or four years ago, now that we've paid down a lot of debt from the Hollinger transaction."
The specialty channels are the focus of the Alliance deal for CanWest Global, which has struggled to gain a strong presence in cable TV with a line of channels that includes Mystery, Men TV and Lonestar.
Rival broadcaster CTVglobemedia Inc. has had greater success on the cable TV front, while Alliance's 13 stations have carved their own niches.
As part of the deal, Global will gain Alliance's ownership of History Television, HGTV, Showcase and others.
"It has been 10 years that we've been trying to get into the specialty arena," Asper said. The deal will "fortify our competitive position against CTV."
Media watchdogs continued to criticize CanWest's announcement.
The Communications, Energy and Paperworkers Union of Canada, through Peter Murdoch, its media vice-president, promises to fight the deal.
"We are demanding that the Canadian Radio-Television and Telecommunications Commission and Heritage Minister Bev Oda order public hearings into this proposed deal,`` Murdoch said in a release.
Another large media union, the Canadian Media Guild, issued a separate statement: "Few people in positions of authority seem ready to question, at least out loud, what such consolidation will mean for Canadian audiences and readers, content creators, advertisers and media employees."
Concerns have begun to mount at Alliance that job cuts could be on the horizon, though Asper said such assumptions are "premature."
Winnipeg-based CanWest is Canada's largest media company. |