OTTAWA – Bell Canada Enterprises’; $685 million divestiture of control of media company Bell Globemedia has been approved by the CRTC.
BGM is 68.5% controlled by BCE, with the rest owned by Thomson Family company Woodbridge Inc. The proposed new structure, announced in December, will see BCE sell all but 20% of its position in the company to the Ontario Teachers Pension Plan (which will hold 20%), Torstar Inc. (20%) and Woodbridge (boosting its holdings to 40%).
However, all involved parties are awaiting a decision by the Competition Bureau as well, so the date of final closing has not yet been determined.
BCE’s minority position will see it retain the rights to access to BGM content, The media conglomerate owns CTV, the Globe and Mail and specialty services such as TSN, Comedy Network, Animal Planet and MTV Canada, among others. The new ownership group also committed to keep the editorial sides of the newspapers (Torstar owns the Toronto Star as well as a number of other dailies, plus a minority stake in publisher Osprey Media) and the TV stations completely separate.
As reported everywhere last week, BGM has also made a bid to purchase CHUM Ltd. Of course, today’s decision does not address that move whatsoever.
The key question surrounding the ownership re-org was whether or not the company had to pay benefits. CRTC policy says that when any change in ownership happens with a Canadian media company, the buyer must provide a package of benefits – normally 10% of the transaction’s value – that usually goes towards producing Canadian content.
The upcoming TV policy review will look at the benefits policy, often seen in the industry as an unwanted sales tax, as CanWest Global CEO Leonard Asper said here.
The company argued – and the Commission (the majority of which, anyway) agreed – that the existing ownership had Bell and Woodbridge in control and the new ownership would, too, and that the direction of the company would be passed to its board of directors.
"After examining the (shareholders agreement), as well as the positions of the applicant and the interveners, the Commission is of the view that neither Woodbridge nor any other shareholder would acquire control of BGM," reads the decision. "Thus, the Commission finds that the applicant has properly characterized the transaction as a change of control under which control would pass from BCE, whose voting interests would be reduced from 68.5% to 20%, to the Company’s Board, rather than a transfer of control to another shareholder or entity."
"We are very pleased with today’s decision," said BGM CEO Ivan Fecan in a statement. "It is clear that the CRTC gave full and careful consideration to all of the issues raised, and approved our application as filed."
Commissioner Stuart Langford, however, believes his fellow Commissioners were bamboozled by a blizzard of legal briefs and other paper.
"(T)hey have allowed themselves to be distracted from the simple facts of this matter by a virtual avalanche of legal documents and legal opinions that either by design or by chance confuse what is in fact a straightforward transfer of control from one shareholder, BCE, to a group of four shareholders: Woodbridge, BCE, Torstar and Teachers," wrote Langford.
"Benefits in the amount of 10% of the value of the transaction must be paid."
Langford adds: "In their legal opinion prepared at the request of BGM, the law firm of Johnston & Buchan takes on the challenge of demonstrating that though BCE has given up control, no one else has taken it over: ‘…we are of the view that the transaction will indeed not result in the acquisition of control by any shareholder or group of shareholders’… Upon approval of this transaction by the Commission, control will not reside in the hands of ‘any shareholder.’
The notion that control will not reside with any ‘group of shareholders’, however, is a conclusion that I for one have difficulty accepting," continued Langford. "Perhaps that is why in its legal opinion J&B never says why it comes to this conclusion. J&B’s rationale seems to echo that oldest of parental maxims: ‘Why is it so?’ ‘Because.’"
Langford cited the 1990 change in control of Telelatino as a pertinent precedent: "In an effort to revitalize Telelatino, the Mascia family reduced its voting interest in the licensee from 67.3% to 27.4%. Four new shareholders came on board, bringing the total number of shareholders to 10. The 10 entered into a unanimous shareholders agreement giving control of the licensee to the board of directors. Sound familiar?
"The Commission concluded that control had passed, ‘… from Mr. Mascia to the licensee’s Board of Directors.’ Tangible benefits in the amount of $3,277,000 were levied," wrote Langford.
