CanWest Global Communications Corp. will have a second suitor today when a consortium backed by the Asper family and supported by Goldman Sachs Group Inc. files a $120-million bid for control of the broadcasting company.
Toronto-based private equity fund Catalyst Capital Group Inc., a substantial owner of CanWest's bonds, has assembled a rival bid for CanWest to compete with last week's offer by Shaw Communications Inc. In addition to Goldman and the Aspers, the Catalyst group includes two former senior executives from Rogers Communications Inc.: John Tory, the ex-CEO of Rogers' cable division, and television executive Rael Merson, who would be the new chief executive officer of CanWest, according to sources familiar with the details.
The Catalyst coalition wants to own 32 per cent of CanWest in exchange for their investment.
Creditors would hold the remainder of the company once a five-month-old restructuring is completed.
The offer, if successful, would thwart Shaw's effort to gain control of one of the country's largest conventional TV networks and a collection of coveted specialty cable channels.
It would also allow the Aspers to maintain a hand in the business founded by Israel Asper in the early 1970s. Leonard Asper, currently CEO of Winnipeg-based CanWest, will become non-executive chairman of the company under the Catalyst plan. If Shaw wins, Mr. Asper is out.
Mr. Asper's continued involvement means that CanWest might not have to make up to $40-million in payments to satisfy federal rules governing a change of control in a Canadian media company, sources say.
The Asper family is expected to contribute up to $15-million to the refinancing of the company, which filed for creditor protection in October. Mr. Merson and Mr. Tory will also make "substantial" investments, according to investment bankers working on the transaction.
But the bulk of the $120-million in cash and assumed CanWest liabilities will come from Catalyst, a $1-billion fund run by distressed debt specialist Newton Glassman. Catalyst has been involved in a number of successful restructurings, including a lucrative turn in the restructuring of printer World Color Press Inc., formerly known as Quebecor World. Mr. Glassman and Mr. Asper went to law school together at the University of Toronto.
The new offer emerges on the same day that Shaw is scheduled to go before a judge in Toronto to get court approval for an offer to buy 20 per cent of CanWest for an undisclosed sum, which analysts estimate is at least $65-million. That offer has the support of a majority of CanWest's creditors.
However, Shaw does not have the backing of Goldman Sachs, co-owner of CanWest's crown jewel, a stable of 13 specialty television networks that includes History Television and Showcase. The bid Shaw launched last Friday contemplates tearing up an agreement that Mr. Asper struck with the investment bank in 2007, when Goldman Sachs financed CanWest's takeover of Alliance Atlantis Communications.
CanWest's arrangement with Goldman Sachs would remain intact under the Catalyst proposal, according to sources familiar with the offer. Executives from the New York-based bank expected to appear in a Toronto court today to support the Catalyst offer, and object to Shaw's plans.
"The No. 1 goal of this process is to help CanWest emerge from creditor protection quickly, as a stronger company, and the Catalyst offer is the best way to achieve that goal," said one investment banker working with the private equity fund.
The Goldman offer takes direct aim at the Shaw bid, which is far from complete.
Sources inside the CanWest restructuring suggest that the Shaw offer has potential problems for the CRTC that could kill the deal. Shaw intends to tell the regulator that it does not intend to pay the benefits payment that would be required as part of the deal.
Benefits, which are money paid into a fund that helps create Canadian programming, are required whenever a radio or TV licence changes hands in Canada. A source within CanWest said these payments could hinder the deal with the regulator.
When informed of the Shaw offer last week, a close friend of Mr. Asper's said the CanWest CEO was silent on the news, and that there has been talk inside the company that he was working on another bid.
If Catalyst is successful, CanWest is expected to remain a public company and apply to relist its shares on the Toronto Stock Exchange. This would give creditors to the company an opportunity to sell their holdings in the public market if they wish. The Toronto Stock Exchange delisted CanWest shares in October.
Both Shaw and the Catalyst group would need federal regulatory approval for their takeover, along with the court's blessing.
Goldman Sachs began working on a potential offer even before the Shaw bid was made, according to a high-placed source inside CanWest. However, when Goldman Sachs got word of the Shaw bid, they sought to insert a clause in their agreement that CanWest sources say gives the investment bank seven days to come back with a counter offer.
The trio of Mr. Asper, Mr. Tory and Mr. Merson brings together three executives with different media backgrounds. Mr. Tory recently stepped down as leader of the Ontario Progressive Conservative party, and works part-time as the host of a talk radio show.
Mr. Merson ran the television division of Rogers Communications Inc. until retiring last year.
CanWest's newspaper unit is now separated from the parent company and controlled by its lenders. That division is being sold in a separate process, run by investment bank RBC Dominion Securities.