Canadian mega-merger: Shaw to buy Canwest


Canada has its own equivalent of the Comcast-NBCU deal in the US. Cable/satellite giant Shaw Communications announced a deal to acquire a controlling stake in Canwest Global Communications, owner of broadcast TV, cable networks and newspapers.

Canwest has been in the Canadian court equivalent of a US Chapter 11 bankruptcy reorganization since October. Now Shaw has reached an agreement with the Ad Hoc Committee of ccreditors and the management of Canwest to acquire a minimum 20% equity interest in Canwest and an 80% voting interest.

The price tag and exact terms of the deal have not yet been publicly disclosed. The terms will be filed on a confidential basis with the court in Ontario overseeing the Canwest restructuring and remain confidential until they are approved by the court. Shaw did say that its initial equity interest may exceed the minimum 20%, depending on how many creditors choose to take cash rather than shares in the restructured Canwest.

“We are excited about the investment and gaining effective control of one of the premier broadcasters and owners of content in the Canadian broadcasting industry at a reasonable valuation. We believe that Shaw’s investment results in a number of benefits to the broadcasting system, including an ability to strengthen local programming, ensure the ongoing viability of the second largest private conventional television network in Canada, and sustain a dynamic and competitive television market” said Jim Shaw, Chief Executive Officer and Vice Chair, Shaw Communications Inc.

Shaw noted that the recent restructuring initiatives undertaken by Canwest have positioned the company as a pure play Canadian broadcaster – so it appears the newspapers are being divested. The reorganized Canwest will operate as a separate private company with a dedicated management team and its own board of directors. Shaw said the structure of the deal will give it the flexibility to increase its ownership stake in Canwest in the future.

“We are very pleased with the firm investment commitment from Shaw. While there is much work still to be done, Shaw’s commitment represents an important step towards a successful financial restructuring of Canwest and is supported by the company and the members of the Ad Hoc Committee,” said Derek Burney, Chairman of Canwest’s Board of Directors. 

“We look forward to benefitting from Shaw’s participation in a reinvigorated Canwest, as it is a strong business partner with a proven commitment to the Canadian television broadcasting industry. This significant investment in conventional television should be seen as a big vote of confidence in the industry and its future,” Burney added.

Canwest said its financial advisor, RBC Capital Markets, conducted an extensive equity investment solicitation process over the past several months, resulting in Shaw being selected as the preferred equity investor.

Creditor approval of the recapitalization transaction is required by no later than April 15, 2010 and the recapitalization transaction must be completed by no later than August 11, 2010. Following successful completion of the recapitalization transaction, Restructured Canwest will be de-listed from the TSX Venture Exchange and will apply to cease to be a reporting issuer under Canadian securities laws.

A look at the new partners. Here is how the two Canadian media companies describe themselves.

“Canwest Global Communications Corp. is Canada’s largest media company. In addition to owning the Global Television Network, operating 18 industry-leading specialty channels and having ownership in 5 specialty channels, Canwest is Canada’s largest publisher of English language paid daily newspapers and owns and operates more than 80 online properties.”

“Shaw Communications Inc. is a diversified communications company whose core business is providing broadband cable television, High-Speed Internet, Digital Phone, telecommunications services (through Shaw Business Solutions) and satellite direct-to-home services (through Shaw Direct). Shaw serves 3.4 million customers, including over 1.7 million Internet and 900,000 Digital Phone customers, through a reliable and extensive network, which comprises 625,000 kilometres of fibre. Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 Index.”

RBR-TVBR observation: As much as citizens and politicians decry media consolidation, the financial reality is that quite a few large media companies in the US, Canada and elsewhere found themselves overleveraged as an unprecedented advertising recession hit. The most logical buyers for these distressed properties are other media companies which are in better financial condition.