Jim Shaw, the feisty western cable king, has knocked aside an 11th-hour rival bid and won court approval to take control of the CanWest Global Communications Inc. broadcasting empire.
The Superior Court of Ontario gave the green light late yesterday to Shaw Communications Inc. despite a competitive offer filed in the early hours before the court hearing. The competing bid came from private equity firm Catalyst Capital Group and included CanWest's founding Asper family, Wall Street heavyweight Goldman Sachs Group Inc. and former executives of Rogers Communications Inc.
The court hearing became heated as Shaw threatened to walk from the deal if it was not approved by midnight.
The decision sets up a possible battle between Shaw and Goldman. Shaw's next step is to renegotiate a three-year deal with the New York investment bank that governs ownership of CanWest's television unit. In court, the lawyer for Goldman Sachs repeated a frequent complaint that it had been left out of the process, while Shaw argued that negotiations with Goldman were the second step after the equity arrangements were in place.
Goldman Sachs also objected to the fact that details of the Shaw investment were kept hidden. Shaw disputes the claims, however, that it is unwilling to work with Goldman on the Alliance arrangement.
Under the terms of the sale of CanWest, Shaw has not been able to talk to Goldman. A source close to the Shaw negotiations said the time will come to negotiate with Goldman, and the company could work with them.
"We're business people," the source at Shaw said. "Anything is possible. What we want is what's best for CanWest, and if that's what Goldman wants, then away we go."
After the bid was approved, Shaw revealed that its investment amounts to a minimum of $95-million in exchange for 20 per cent of the equity and an 80-per-cent voting interest in the restructured company. The competing Catalyst bid offered up $120-million for 32 per cent of the equity in a restructured CanWest.
The Catalyst-led bid came in at roughly 3:30 in the morning yesterday, according to a report by the independent monitor appointed to oversee CanWest's restructuring. The move complicated court proceedings that were expected to rubberstamp the Shaw deal.
The lawyer representing Shaw, Robin Schwill, argued that considering such last-minute bids "does unconscionable violence to the integrity of this process."
While the new bidders asked for an adjournment until Monday to allow a comparison of the two deals, Shaw sent a message through its lawyer saying it was not prepared to wait for a decision, and in fact insisting the company would walk away from the offer if no decision had been reached by midnight on Friday.
"Shaw's going to make threats. People always do in these situations," Gavin Finlayson, a lawyer for Catalyst, told the court.
The tight, seven-day window between the announcement of Shaw's bid and a court date to approve the offer put unnecessary pressure to approve the deal on the Ontario judge, said sources working with the Catalyst group. Late yesterday, sources close to Catalyst and Goldman Sachs said both players are looking at other legal actions that could derail Shaw's offer, but declined to discuss specific options.
Catalyst faced a hurdle in court since Shaw's offer received the support of many of the note holders involved in the process.
"The agreement presented by Shaw was the best offer under all circumstances," CanWest lawyer Lyndon Barnes said.
Shaw faced criticism from the competing bidders over suggestions that it wouldn't adhere to certain CRTC rules, such as making so-called benefits payments, which support the creation of Canadian programming. The payments are required any time a radio or TV licence changes hands in Canada.
However, Ken Stein head of regulatory affairs at Shaw, said the company doesn't intend to dodge the issue. Though it hasn't been raised yet by Shaw, those discussions will be held with the regulator, he said.
"Shaw has not even considered the issue," Mr. Stein said, noting that the payments are still to be addressed.
In the case of this deal, the payments could be worth $40-million or more, of which Shaw would be responsible for 20 per cent, given its equity stake. The Shaw deal would need regulatory approval.