CMPA meets with Shaw, but don’t agree on Canwest-Shaw benefits package

OTTAWA--The Canadian Media Production Association (CMPA) held two meetings with Shaw Communications Inc. last week to discuss the company’s benefits package arising from its $2-billion purchase of Canwest Global Communications—but they walked away from the meetings with plans to take their disagreements to the CRTC. Norm Bolen, president and CEO of the CMPA, said he met twice last week with Paul Robertson, Shaw’s vice-president of broadcasting, but they continue to have fundamental disagreements about Shaw’s proposed benefits package. The CRTC has opened a proceeding on Shaw’s purchase of Canwest Global’s broadcasting assets, setting a public hearing for Sept. 20. One of the big-ticket items to be discussed at the hearing will be Shaw’s proposed “tangible benefits” package, which the CRTC requires when it approves the transfer of ownership or control of broadcasting assets. The policy is intended to ensure a public benefit from broadcasting transactions and provide funding for independent performers and producers. Traditionally, tangible benefits packages have amounted to 10 per cent of the transaction. Shaw has proposed a benefits package amounting to $203 million, but has come under fire for including $23 million on digital television transmitters in non-mandatory markets (markets where broadcasters are not required to make the switch from analogue to digital broadcasting by the deadline of Aug. 31, 2011) and an outstanding $95 million in benefits money that Canwest had yet to pay as a result of its purchase of Alliance Atlantis Communications in 2007. In an interview, Bolen said the CMPA takes issue with Shaw’s $506-million valuation of the “change in control” of Canwest—meaning that Shaw would be expected only to pay about $50 million in benefits. In correspondence with the CRTC, Shaw has argued that most of the $2-billion transaction comes from paying off Canwest’s net debt of $815 million and buying out Goldman Sachs’ interest in the company for $700 million. “We have some concerns. We believe the transaction has been significantly undervalued,” Bolen said. “The total payment that’s going out is over $2 billion.” In a May 28 letter to the commission, Shaw proposed a $50.6-million tangible benefits package, which included $27.6 million in spending on production benefits and $23 million on digital television transmitters in non-mandatory markets. The commission subsequently asked Shaw to detail how it would spend a benefits package of $200 million, or 10 per cent of the $2 billion deal, and in a July 12 letter, Shaw proposed $108 million in benefits (which included $23 million for digital transmitters) plus “$95 million for the fulfillment of outstanding benefits” that Canwest has yet to pay for its acquisition of Alliance Atlantis. Shaw’s total proposed package, including Canwest’s outstanding benefits, amounts to $203-million. But Bolen said, in the view of the CMPA, benefits cannot be carried forward from previous transactions. “As far as we’re concerned, those benefits are a done deal. They’re in the system. They’re still owing and they would have to be paid no matter what,” Bolen said. “That does not provide an offset.” Bolen added that the CMPA is conducting a financial analysis of the deal to come up with its own numbers for a tangible benefits package, which it will present to the commission. “We have respectfully agreed with Shaw that basically we will go to the hearings and we will go through the process. Everyone will make their arguments, and there will be lots of interveners,” he said. “We do believe that the $108 million benefits package is short of what should be paid.” The Alliance of Canadian Cinema, Television and Radio Artists (ACTRA) also says it opposes Shaw’s proposed benefits package. In an email statement to The Wire Report, Stephen Waddell, national executive director of ACTRA, said the organization agrees that Shaw should not incorporate Canwest’s outstanding benefits into its own. “While we do want a diverse, fully Canadian-owned broadcasting system, the business decision that Shaw made to purchase the assets of CanWest is not in itself a 'tangible benefit' from a public policy perspective,” Waddell wrote. “Consistent with the CRTC's policy and past practice, Shaw must pay the full value of tangible benefits, i.e., 10% of the transaction cost, plus the remaining benefits from Canwest's purchase of Alliance Atlantis.” Shaw has said there are several “intangible benefits” arising from its purchase of Canwest’s broadcasting assets, including removing the assets from creditor protection; preserving Canwest as a Canadian-owned company; and strengthening the company’s money-losing local television stations. “Shaw's acquisition of Canwest prevented protracted litigation between the two American owners of Canwest and its specialty channels, assuring the survival of Canada's second largest over the air broadcaster and preserving the specialty channels intact and in Canadian hands,” Jean Brazeau, Shaw’s senior vice-president of regulatory affairs, wrote in an email to The Wire Report. Shaw’s $2-billion purchase of Canwest’s broadcasting assets has received court approval and awaits regulatory clearance from the CRTC and the Competition Bureau. sdoyle@thewirereport.ca

CMPA meets with Shaw, but don’t agree on Canwest-Shaw benefits package

Broadcast | August 3, 2010

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