Shaw proposes $203-million benefits package for Canwest deal

OTTAWA--As part of its $2-billion purchase of Canwest Global Communications, Shaw Communications Inc. has proposed a $203-million “tangible benefits” package to the CRTC to ensure a public benefit from the deal. But in the company’s proposed benefits package, Shaw says it wants to include spending on digital television transmitters and an outstanding $95 million in tangible benefits leftover from the 2007 Canwest-Alliance Atlantis deal. “I can’t say I’m surprised they’re trying to get a bit of a bargain that way,” Gregory Taylor, a broadcasting expert in Montreal who is currently conducting research for Ryerson University, said in an interview. The CRTC requires the payment of “tangible benefits,” with the aim of supporting Canadian performers, producers and culture, when it approves the transfer of ownership or control of major broadcasting assets. Traditionally, the benefits packages amount to 10 per cent of the transaction. The question of tangible benefits arose Thursday when documentation released on the commission website laid out Shaw’s breakdown of more than $200 million in tangible benefits spending it is proposing as part of its $2-billion purchase of Canwest’s broadcasting assets. Among Shaw’s $203 million in proposed tangible benefits, the company says it will spend $23 million on digital television transmitters in non-mandatory markets, that is, markets where broadcasters are not required to make the switch from analogue to digital broadcasting by the deadline of Aug. 31, 2011. Shaw also proposes that its benefits include an outstanding $95 million in intangible benefits money that Canwest had yet to pay as a result of its purchase of Alliance Atlantis Communications. In 2007, backed by New York investment firm Goldman Sachs Group, Canwest purchased Alliance Atlantis for $2.3 billion. "This calls into question the whole purchasing scheme that Canwest used to begin with when Goldman Sachs was footing 85 per cent of the bill," Taylor said. “Should Goldman Sachs be paying up that outstanding benefits package? It calls into question the whole foreign ownership thing.” Documents released on the commission website Thursday show that the CRTC, in a letter to Shaw on May 7, asked the company several questions about its “tangible benefits” package, and how it would spend 10 per cent of the $2-billion deal, roughly $200 million, on tangible benefits. In a response on July 12, Cynthia Rathwell, vice-president of regulatory affairs and programming at Shaw, laid out a list of benefits totaling $203 million. “o further reinforce the fact that these transactions serve the public interest from the perspective of the Commission and other stakeholders, including independent producers, Shaw would like to make a final proposal that would raise the total of new and outstanding benefits to $108 million in new benefits for digital and programming initiatives and $95 for the fulfillment of outstanding benefits.,” Rathwell wrote. The CRTC announced Thursday that it has scheduled a hearing on Sept. 20 to consider Shaw’s proposed purchase of Canwest Global. Insiders say Shaw’s benefits package is expected to be a high priority item at the hearing. In the notice of consultation released Thursday, the commission identified tangible benefits as one of the areas on which the CRTC may want to focus. The commission noted that it may want “to discuss the proposed benefits package in terms of … acceptability, and proposals in respect of any benefits that may be found to be unacceptable to the Commission.” The CRTC added that its tangible benefits test requires that the benefits must “be directed to projects and initiatives that would not be undertaken or realized in the absence of the transaction” and that generally applicants must “demonstrate that expenditures proposed as tangible benefits flow predominantly to third parties, such as independent producers.” Shaw is applying to the CRTC for regulatory approval for its purchase of Canwest Global’s broadcasting subsidiaries and licences, a transaction worth a total of $2.005 billion. "We look forward to completing what we anticipate will be the last step in finalizing Canwest's emergence from protection under the Companies' Creditors Arrangement Act so that we can begin the job of rebuilding Canwest," Jim Shaw, CEO of Shaw, said in a release Thursday. In its proposed $203-million tangible benefits package, Shaw also proposes $24 million for initiatives to develop scripted programs; $18 million for new media content to complement domestic programming; and $43 million for “new morning newscasts” in difficult Canwest TV markets including stations CIII-TV Toronto, CKND-TV Winnipeg, CFRE-TV Regina, and CFSK-TV Saskatoon. Emphasizing a need for local newscasts, Shaw noted that the commission has “explicitly and consistently supported diversity of editorial voices and local reflection in more communities.” Shaw said that, without its proposed $43-million benefits proposal to support local news, “there is no prospect for the provision of local morning newscasts by Canwest in these markets.” Shaw argued in its July 12 letter that the commission had no guarantee that Canwest, which was under creditor protection, could pay its outstanding tangible benefits of $95 million. “here is no guarantee that the outstanding benefits would have been fulfilled had Canwest’s assets been acquired pursuant to a different resolution of Canwest’s insolvency,” Shaw wrote. “The fact that Shaw has the financial ability to assume these obligations and ensure their fulfillment is in itself a significant benefit to the system and Canadian producers.” The commission approved the Canwest takeover of Alliance Atlantis in 2007 in regulatory decision 2007-429. Shaw added in the letter that the company’s spending on digital transmitters in 35 non-mandatory markets should be considered a tangible benefit partly because the company is willing to share the towers. "Shaw is prepared to make its towers in these markets available to other broadcasters to provide them with an incentive to carry out their own conversion to digital transmission in non-mandatory markets,” Shaw wrote. “This commitment has been made as a tangible benefit, should they be required by the Commission or, if no such benefits are assessed, as a commitment in lieu of benefits.” For the September hearing to consider the deal, the commission said it may also examine “the potential impact on the television market (i.e., market power that Shaw could enjoy and the potential to adopt anti-competitive behaviour), and may examine various related ownership issues.” In the letter, Shaw also identified a number of “intangible benefits” arising from the deal, including removing Canwest from creditor protection; preserving Canwest as a Canadian-owned company; keeping Canwest as “a strong local television voice across Canada and strengthening local programming”; preserving the Alliance Atlantis-Canwest merger; bringing a desire to innovate content distribution in a digital environment; and preserving competition and diversity of voices in the English-language market. “Shaw respectfully submits that there could not have been a more positive outcome for the resolution of Canwest’s insolvency and restructuring in terms of benefits to the system and the realization of Broadcasting Act objectives,” Shaw wrote. Written comments are due by Aug. 23. sdoyle@thewirereport.ca

Shaw proposes $203-million benefits package for Canwest deal

Broadcast | July 22, 2010

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