GATINEAU – “No amount of tinkering” can save this deal in the minds who run ACTRA, the actors union, whose president, Richard Hardacre addressed the CRTC this morning during day 2 of the hearing into CanWest Global and Goldman Sachs’ purchase of Alliance Atlantis’ broadcast assets.
Despite assurances yesterday by CanWest and GS leaders that CanWest will run the broadcast company, make all the operational decisions and that the U.S. investment banking firm which will inject 65% of the equity into the purchase won’t interfere with the day-to-day decision making by the new combined company, many members of the Canadian creative community simply don’t believe it, or don’t trust that GS will be such a benign investor, waiting to get their return in 2011 or so.
The fact that GS will inject over $650 million and CanWest just $260 million means “overwhelming control in fact” resides “in a tower in Manhattan,” said Hardacre.
No amount of assurances when it comes to a reporting committee or a programming committee or the fact that board voting control will reside in Canada with CanWest, which were outlined yesterday (Hardacre called it “smoke and mirrors”), can overcome that equity difference, according to ACTRA.
And while ACTRA is primarily concerned with the production of Canadian drama for its members, “foreign ownership is inextricably linked to the drama issue,” added Hardacre.
CRTC chairman Konrad von Finckenstein asked the ACTRA representatives if the deal could be salvaged, in their minds, by CanWest increasing its equity position somewhere higher than 50%. “Spell this out for me… Is it the equity? Is that the key in your mind?”
Fasken Martineau Dumoulin lawyer Bob Buchan, who represents the Canadian Coalition of Audiovisual Unions, of which ACTRA is a member, referenced precedent that when the equity level is so high by one party, there is a de facto degree of control that plays into anyone’s appraisal of the situation.
In the past, noted Buchan, a very experienced legalist in these types of matters in Canada, the CRTC “always expressed concern when shareholdings got above 40%.”
He also cited the Persona precedent, which Cartt.ca first noted as a parallellast year when the deal was announced, where the Canadian cable operator was rescued from financial difficulty in 2003 by a team which was 65% backed by Texas investment banker Hicks, Muse, Furst, Tate. In that case, the U.S. investment worked and the cable company has even returned to Canadian hands.
Buchan feels that one instance was an anomalous situation where a small, spread out cable company had to be rescued and the option approved was the only one on the table. “It was a small, failing cable company,” said Buchan, where with the CanWest/Alliance Atlantis combination, we’re talking about something far larger and far more important to the Canadian Broadcasting Act.
Von Finckenstein and commissioners Michel Arpin, Len Katz and Elizabeth Duncan all pushed for an equity figure that would be acceptable to ACTRA for GS to own.
While the CCAU did not take an official position and Buchan said he did not provide one to them, he said certain individual members of the coalition say as long as GS owns “less than 50% – closer to 46%,” said Buchan, that would be an acceptable level.
The Commission panel noted, however, that if CanWest added more debt to get to a 51% equity level, for example, similar control problems could still exist thanks to debt covenants with lenders that may well be foreign, too, so when “Mr. Asper is basically betting the farm,” on this deal, said Katz about the CanWest CEO, “why do you think you’re in a better position to dictate how this transaction will flow?”
Hardacre explained that ACTRA wants a strong CanWest, but “what we do not want to see is a major company which is not Canadian.”
