OTTAWA – Astral Media Radio Inc. is proposing a $63.3 million benefits package over seven years as it seeks regulatory approval for its $1.082 billion acquisition of 52 over-the-air radio stations and two small-market TV stations from Standard Radio Inc. Astral also pledges to take measures to ensure compliance by the Standard Radio stations that didn’t meet licence conditions with regard to Canadian content, and to pay any outstanding tangible benefit amounts connected to stations previously purchased by Standard that are included in the Astral deal.
Referring to the deal as “evolutionary, and not revolutionary,” Astral tells the CRTC that the transaction complies with all commission policies, and doesn’t raise ownership or competitive issues.
On the radio side, Astral is looking to acquire 20 AM stations and 32 FM stations, 30 repeater transmitters in small markets, and nine digital radio stations from Standard. If the deal is approved by the regulator, Astral would own and control in total 81 radio stations (21 AM and 60 FM), the two over-the-air stations with their rebroadcasting transmitters and a number of transitional digital radio stations.
However, Astral says that the radio stations it will acquire are in different markets than the ones it currently has a presence. Astral’s application contains a table showing its existing radio stations are in Quebec, Nova Scotia and New Brunswick, while Standard’s are largely in Ontario, Manitoba, Alberta and British Columbia. The only market where both companies have a station is Montreal, but Astral’s station services the French-language market and Standard’s the English market. Astral also has two FM stations in Gatineau, Quebec – next to Ottawa, where Standard owns a single FM station – but the stations serve different language markets.
On the television side, Astral operates pay and specialty TV services, but Standard has no such channels, “so the competitive situation in that sector would not change as a result of the acquisition,” Astral writes in its submission. The two stations it would acquire are the B.C.-based, over-the-air CFTK-TV in Terrace and CJDC-TV in Dawson Creek. Both stations are CBC affiliates, with the Terrace station producing 6.5 hours of local programming per week, and the Dawson Creek station 11.5 hours per week.
The purchase would allow Astral to acquire a “national profile,” but it would remain a mid-sized player, states the Montreal-based broadcaster.
Astral says its and Standard’s revenues combined would amount to only a quarter of the five largest Canadian media companies, which each have annual revenues from all media operations (including publishing) between $2.5 billion and $3 billion.
If radio is considered independently, then Astral with the Standard stations would comprise 22% of total listening hours by 2005 figures (English and French-language stations combined), and 21% of total radio revenues. In contrast, Corus has an 18% share in both those categories.
“While the combined assets would thus create a large company in terms of radio, their weight is a long way short of market dominance,” notes Astral.
Taking a page from BCE, Astral also argues the efficiencies and resources of a larger group are needed to ensure continued support for strong local programming.
Also, Astral points out to the commission that it has a “history of successful acquisitions,” particularly with regard to the Telemedia and Radiomutuel stations. It is intended that Standard president and CEO Gary Slaight would become a member of the Astral Media board of directors, if the sale is approved.
The Standard radio assets are valued at $1.026 billion, the two TV stations at $16.7 million and the remainder of the $1.082 billion purchase price is for non-regulated assets.
Accordingly, $61,585,568 of the benefits package is tied to radio – or 6% of the total radio asset value – and $1,666,850 – or 10% of the value of the two TV stations.
Astral notes in its application that it is hiring a coordinator of Canadian content development, who will be responsible for the development, launch and accountability of all of the Canadian content funded by the broadcaster.
Astral proposes allocating the radio benefits as follows: $30,792,341 to the Starmaker Radio Fund, $20,528,227 to FACTOR/MusicAction, and $10,265,000 to other initiatives, such as expanding the Canadian Radio Star Competition, the TV production of the Canadian Radio Music Awards, the Canadian Songwriters’ Hall of Fame, the Astral Media Small Market Internship Program, and the National Aboriginal Achievement Foundation.
Astral tells the commission it will maintain the comprehensive monitoring system and new software implemented by Standard after CILK-FM Kelowna was found to be in non-compliance with its Canadian content requirements, and will continue to implement the measures put in place at CISL Richmond to ensure compliance.
Astral also indicated it would not seek changes to the recently licensed Standard FM station in Regina, and will pay the outstanding benefits amounts connected to Standard’s purchase of the Telemedia Radio assets, of Craig Music’s CKMM-FM, CFQX-FM, CKXA-FM and CKX-FM, and of CHUM’s CHOM-FM Montreal.
Astral notes in its application it will finance the purchase with $879,882,800 in cash and $202,487,066 in equity. The cash amount will consist of $130,000 from Astral’s cash flow and $749,882,800 in bank financing.
Astral and Standard signed an agreement on April 12 by which all of Standard’s radio and TV stations would be acquired by Astral Media. The CRTC gazetted Astral’s submission for regulatory approval on June 21. Comments on the application are due July 26. The matter will be considered at a public hearing on August 27.
