Astral Media Inc. chief executive officer Ian Greenberg placed a call in late October to revive a takeover that just about everyone had given up for dead.
Answering the phone was George Cope, CEO of BCE Inc., the communications giant that had watched the federal broadcast regulator drive a stake into its ambitious $3-billion plan to acquire Astral.
Mr. Cope’s public anger over a decision he fumed was “absurd,” combined with huge legal obstacles to a court appeal, largely extinguished hope for saving that deal. Astral’s stock went into a tailspin after the Canadian Radio-television and Telecommunications Commission ruling on Oct. 18, falling 15 per cent to $39.51, and its board of directors began reviewing other options for a company that Mr. Greenberg’s family wanted to sell.
During that October call, Mr. Greenberg had two things to say to Mr. Cope, according to people familiar with the conversation. Astral’s board wanted to negotiate a new deal with BCE. And, having met with CRTC chairman Jean-Pierre Blais the week after the ruling, Mr. Greenberg believed that a new and smaller acquisition plan might allay the regulator’s concerns about handing too much market power to one company. Astral’s assets include almost two dozen specialty TV channels and more than 80 radio stations.
By the time the call was over, Mr. Cope’s fury had died. “George calmed down,” said one person familiar with the conversation.
Within days, Mr. Cope and Mr. Greenberg agreed to explore a new deal.
On Nov. 9 the two chiefs travelled to the CRTC’s headquarters in Gatineau, Que., to sit down with Mr. Blais. People familiar with that session described it as a “calm and non-confrontational” airing of the two companies’ plans.
CRTC spokesman Denis Carmel confirmed the meeting took place and that their potential plans “to reapply” for approval of a new takeover plan was discussed, but no “pretest or preapproval” occurred during the session. Still, while they may not have received a nod from the regulator, the two men walked away from the meeting with a determination to craft another takeover agreement that Astral confirmed on Friday is being negotiated.
A spokesman for BCE declined to comment on the discussions, and Astral officials could not be reached.
Sources familiar with the negotiations said the two sides are finalizing the terms of an agreement, of roughly the same $3-billion valuation as the original deal, that is now expected to be unveiled next week. The centrepiece of the new deal is a plan to auction off a number of Astral’s English-language television assets in an attempt to alleviate the CRTC’s concerns about the combined company having control over too much of the TV viewing audience.
Details about which properties might be put up for sale are not expected to be revealed. Sources said these details will be included in an application to the CRTC for regulatory approval. The commission would make the application public only after fully vetting it. That process could take months. BCE and Astral would then likely have to submit to another hearing.
If the companies got to that point, their executives would do well to adopt a radically different pose. The corrosive effect of their demeanour during the hearings – described by some industry observers as “arrogant” – was compounded when they excoriated the commission for its decision. Mr. Cope said the rules for a takeover had been “changed and torqued,” while Kevin Crull, the president of Bell Media, called the decision “unprincipled.”
They will need to walk back on those comments, since the commission has indicated it will be judging any newly proposed takeover on more than just market concentration. While it does not judge companies in quite the same way its British counterpart Ofcom does – declaring whether certain corporations are “fit and proper” to hold broadcasting licences – it has telegraphed that it expects licence holders to contribute to Canadian society.
Moreover, a revised BCE-Astral deal would also face other regulatory hurdles. Even if BCE manages to quell the CRTC’s concerns about its post-acquisition television audience share, its revised application would also have to satisfy more subjective criteria to cinch approval. That includes proving the revised deal is, in fact, in the public interest.
Astral’s class A shares closed Friday at $44.40, up 5 per cent in heavy trading on the Toronto Stock Exchange.