Canadian mega-merger moving forward


An Ontario Superior Court of Justice (Commercial List), operating much the same way as a US federal bankruptcy court, has approved the plan to have Shaw Communications acquire a controlling stake in Canwest Global Communications. Thus, we now know some financial details of the transaction.

Under the “subscription agreement” approved by the court, Shaw, a major cable MSO, will buy $95 million ($ figures in Canadian dollars) worth of Class A Voting Shares of a restructured Canwest, Canada’s largest TV company, which represents a 20% equity interest and an 80% voting interest. Thus, the implied equity value of the new Canwest is $475 million.

As previously reported, Shaw has also agreed to buy out some Canwest creditors for cash, which will increase its initial 20% equity stake. The terms for the cash buyouts were explained in a press release issued by Canwest:

“Under the amended terms of the recapitalization transaction, affected creditors (including the members of the Ad Hoc Committee) who would otherwise be entitled to receive at least 5% of the outstanding equity shares of Restructured Canwest may elect to receive shares in full satisfaction of their claims. All other affected creditors, including those eligible to receive shares of Restructured Canwest but which have elected not to receive shares, will receive cash payments to extinguish their claims, in amounts equal to the value of the equity that they would have otherwise received under the amended transaction involving Shaw.

As noted above, holders of Canwest’s existing 177.6 million shares will receive cash payments in exchange for their shares equivalent in the aggregate to 2.3% of the implied equity value of Restructured Canwest, or approximately $11 million in aggregate.”

Completion of the Canwest reorganization is subject to various regulatory approvals, including approval of the Canadian Radio-television and Telecommunications Commission (CRTC). Under the terms of the various agreements, creditor approval of the recapitalization transaction is required to be obtained no later than April 15, 2010, and the closing of the recapitalization transaction must occur no later than August 11, 2010. A separate court-supervised financial restructuring is dealing with the newspaper holdings of Canwest Limited Partnership and Canwest (Canada) Inc.