Shaw to buy control of Canwest TV operations

OTTAWA (Reuters) - Debt-laden Canwest Global Communications Corp CGS.V, Canada's biggest media company, said on Friday that Shaw Communications Inc SJRb.TO has agreed to acquire a 20 percent equity stake and 80 percent voting interest in its television business.

A Canwest sign is seen outside an office building in Toronto, October 6, 2009. REUTERS/Mark Blinch

Canwest, which has struggled under a debt load of about C$4 billion ($3.8 billion), filed for creditor protection in October 2009 for its broadcast operations, including its Global TV network and certain specialty channels.

Financial terms of the deal with Shaw, which owns cable and telecom services in Western Canada, were not disclosed.

Shaw’s investment in Canwest Media does not affect Canwest’s newspaper division and the auction now under way for its newspaper assets. The publishing business, with the exception of the National Post newspaper, was put into creditor protection on January 8.

Canwest financial advisor RBC Capital Markets selected Shaw as the preferred equity investor after a solicitation process that stretched over several months.

“We are excited about the investment and gaining effective control of one of the premier broadcasters and owners of content in the Canadian broadcasting industry at a reasonable valuation,” said Shaw Chief Executive Jim Shaw.

The arrangement with Shaw fulfills a requirement in Canwest’s support agreement with debtholders for new equity investment. The transaction, which requires creditor, court and regulatory approval, will take place after Canwest has restructured and emerged from creditor protection.

Canwest said that Shaw is prepared to fund cash payments to affected creditors, Canwest Media and other Canwest subsidiaries involved in the bankruptcy proceeding.

It is also prepared to fund cash payments to existing shareholders in exchange for additional equity in the restructured company, Canwest said.

Shaw said its initial equity interest will exceed 20 percent depending on the number of Canwest creditors that elect cash, rather than shares, in the restructured Canwest.

“The industry’s investments in media assets have historically not generated stellar returns,” UBS analyst Phillip Huang said in a note on Shaw’s move.

“We believe the investment in media assets, the inherent uncertainties related to the impact of launching a wireless business, and intensifying competition with (rival Western Canadian telecom company) Telus will increase Shaw’s risk profile in 2010.”

Some of Canwest’s debt is tied to a 2007 television expansion deal with an affiliate of U.S. investment bank Goldman Sachs to buy specialty-TV group Alliance Atlantis Communications for C$2.3 billion. Those assets are not under court protection and not affected by Shaw’s investment.

In 2000, Canwest acquired newspapers from former press baron Conrad Black’s Hollinger International in a deal worth C$3.2 billion.

($1=$1.05 Canadian)

Reporting by Susan Taylor, with additional reporting by Ashutosh Joshi in Bangalore; editing by Peter Galloway