Leonard Asper has resigned as chief executive officer of CanWest Global Communications Corp., but is not yet willing to let go of the company founded by his father.
Mr. Asper continues to work on a potential bid to stay on as a key investor in CanWest. However, since the company and its board have supported a recent deal to bring in cable giant Shaw Communications Inc. as a 20-per-cent investor, Mr. Asper's rival bid is now in conflict, sources close to the company said.
In a memo to CanWest employees Thursday, Mr. Asper said he needed to step down to pursue other opportunities, although he did not reference the rival bid directly.
“This decision did not come without a lot of careful consideration. Taking this action now will also allow me to pursue other business opportunities and avoid any conflict of interest that I may have.”
As the company undergoes a financial restructuring, it has been looking for a new Canadian investor. Shaw put up $95-million two weeks ago for a stake in CanWest Media Inc., which includes the company's major broadcast operations such as Global Television. As part of the deal, which was approved by an Ontario judge last week, CanWest's officers and directors are obligated to give their wholehearted support to the takeover.
That agreement put Mr. Asper in a bind that quickly led to his resignation, as the former CEO is working closely with New York investment bank Goldman Sachs Group Inc. and private equity firm Catalyst Capital Group to oppose Shaw's bid.
Mr. Asper and his family have pledged up to $15-million to the Catalyst offer. The group launched a rival bid at the last minute in February, offering up $120-million for 32 per cent of the equity in a restructured CanWest. It was turned down by an Ontario Superior Court judge.
“Big picture, I look back at other transactions, whether it's Nortel selling wireless assets and Research In Motion not following the process, and trying to claim that they had an offer that wasn't looked at, that kind of thing,” said Chris Diceman, a senior vice-president at bond rating agency DBRS.
“This group didn't follow the process that was clearly laid out by the Ad Hoc committee, by RBC, the advisers, and tried to get a bid in at the 11th hour … Frankly, I don't have a lot of sympathy if you don't follow the basic steps and process that are put in place to field an offer.”
There are several ways Mr. Asper and Goldman Sachs could inject themselves back into the CanWest situation.
Goldman Sachs owns a significant portion of CanWest's broadcast operations, which it obtained through its financing of CanWest's takeover of Alliance Atlantis Communications Inc. in 2007.
Since CanWest and its creditors will have to work out an agreement with Goldman Sachs at some point, the investment bank could use those negotiations to take a stake in CanWest. It is possible that group could insist that Mr. Asper become the new Canadian investor, rather than Shaw.
The value of Goldman's stake has not been determined, but if it is determined to be worth more than one-third of the broadcast operations, Goldman would have enough votes to push out Shaw if it wanted, using Mr. Asper as the Canadian investor in the deal.
The break fee for the Shaw deal is $5-million, a sum considered small enough that either side could walk away.
Shaw would not comment on the matter Thursday.
If Shaw does attempt to renegotiate CanWest's specialty TV partnership, sources close to the investment bank say Goldman Sachs would attempt to make a claim on CanWest worth an estimated $500-million, a claim that would have the same merit as debt held by CanWest's bondholders. Such a claim could give Goldman Sachs the power to vote down the Shaw offer.
Under the terms of the sale of CanWest, Shaw has not been able to talk to Goldman. However, Shaw and Goldman are scheduled to meet on March 8, and Shaw has said it could work with the Wall Street giant. Court documents show another potential buyer, Quebecor Media Inc., opted out of the process because it precluded talking to Goldman Sachs.
Mr. Asper enjoys a cordial relationship with Jim Shaw, according to sources close to both executives. However, there is a history of bad blood between the two clans. CanWest's founder, Izzy Asper, fought a lengthy and bitter battle with Shaw founder JR Shaw in the 1990s for control of TV and radio company WIC Western International Communications: the two tycoons eventually split the prize.
Mr. Asper's resignation comes after a decade at the helm of the company his father, Izzy Asper, founded in 1974. Leonard Asper took the reins of the company as CEO in June, 1999, at the age of 35. Izzy Asper passed away in 2003.
The man Mr. Asper replaced at the time – Peter Viner, who had stepped in as CEO two years earlier after Izzy Asper retired from running the company and took the title of executive vice-chairman – now steps back into the role at CanWest's broadcast division. Mr. Viner, a veteran CanWest executive, came out of retirement last November to become interim president overseeing the TV operations.
“As the company continues to work through the separate, court-supervised financial restructurings of its publishing and broadcasting groups, it is a natural time for me to move on,” Mr. Asper told staff.
“I have every confidence in the strong leadership teams running the publishing and broadcasting businesses and their ability to guide these businesses through the restructuring period.”
With files from reporter Grant Robertson
