After being dealt a crippling blow by the federal broadcast regulator, BCE Inc. is making a last-ditch effort to salvage its bid for Astral Media Inc.
On Friday morning, Ottawa rejected BCE’s initial plea for the government to reverse the Canadian Radio-television and Telecommunications Commission’s decision that quashed its $3-billion takeover of Astral. But the Montreal-based media giant is now making a second request to Ottawa, this time asking that the cabinet issue a policy directive to the commission, instructing it to “follow the rules they put in place,” said chief executive officer George Cope.
BCE contends that the CRTC didn’t follow its own guidelines for measuring television market share, arguing that viewership of American networks by Canadians should be considered. Although BCE and Astral would own many Canadian stations combined, channels such as CNBC, which rivals Business News Network, are direct competitors, Mr. Cope said, and should be included in market share figures. If they are, BCE said its market share falls within the acceptable limits.
However, legal experts and people familiar with the CRTC’s inner workings said the chances of the CRTC revising its interpretation of the guidelines is slim. Not only have very few CRTC decisions ever been overturned or reconsidered – and those that have related to licensing agreements – the CRTC’s own guidelines are not binding. Mr. Cope himself acknowledged that his company has a “hill to climb,” adding that he is not ruling out additional steps such as a court appeal.
Investors seemingly don’t have much faith in BCE’s chances, either. Astral’s share price plummeted 16 per cent on Friday, wiping out almost all of the premium that BCE was willing to of<FZ,1,7,16>fer them. The day before the takeover was first announced, Astral’s shares were worth $36.25 each; they closed Friday at $39.51.
Visibly frustrated, Mr. Cope has taken to using harsh language to express his reaction to the CRTC’s ruling. In an interview with The Globe and Mail on Friday, he said he and his team were “dumbfounded” and “outraged,” adding that parts of the CRTC’s ruling were “absurd.”
His language built on rhetoric used by BCE in the news release it issued Thursday evening. In that statement, the company said it was “shocked” by the decision and added that the ruling “reflects a bygone era.”
Mr. Cope said he is particularly frustrated because he worked with a team of lawyers for months to abide by the CRTC’s market share guidelines. “The concept that we wouldn’t understand the definition of market share is absurd. It’s just absolutely absurd,” he said.
“They redefined the rule yesterday,” he added, noting that the CRTC took American channels into consideration when judging market share when BCE acquired CTV Inc. in 2010 and when Shaw Communication Inc. purchased the Global television network.
Even if cabinet issues a policy directive to the CRTC, there’s a possibility that another rival will come in and bid for Astral in the meantime. Many analysts noted that rival firms such as Cogeco Inc. and Rogers Communications Inc. could also run into the market share ceiling, but there is a growing assumption that other bidders could come in and scoop up different parts of Astral.
“We have assessed the potential of a sale of Astral and do not see a single bidder emerging to purchase all of the assets; instead a sale of various businesses is possible to a variety of different bidders,” noted Scotia Capital analyst Paul Steep.
With files from reporter Boyd Erman