An ambitious radio station operator is abandoning Alberta in hopes of expanding its empire into Eastern Canada, as rivals BCE Inc. and Astral Media Inc. consider selling stations in lucrative markets ahead of a multibillion-dollar merger.
Newfoundland Capital Corp. Ltd. (Newcap) intends to sell 32 radio stations in the province, and could use the proceeds to bulk up on the profitable radio stations in cities such as Toronto and Montreal that are expected to be put on the market by Bell and Astral in the next month.
Bell and Astral are expected to sell some radio and television stations in order to convince the Canadian Radio-television and Telecommunications Commission (CRTC) that their $3-billion deal wouldn't put too much power in the hands of the newly formed company. This is the second attempt at a deal, after the first try was shot down by the regulator over concerns about market concentration.
"It's certainly an option," said chief executive officer Rob Steele, when asked if he would be a buyer if radio stations were to be put up for sale. "Our advantage is they are trying to get a deal approved … we want to focus on Ontario and to the east."
There is no shortage of stations to sell, should the media companies decide to shrink their holdings. Astral has 84 stations and Bell Media owns 33, and the companies compete in several markets. As part of their original deal, Bell offered to sell 10 stations across the country (Toronto, Vancouver, Calgary, Ottawa and Winnipeg) to bring it in line with ownership regulations that govern how many stations a company can own in a city.
Details of the new Bell-Astral plan will likely be made public in early February when the CRTC opens the deal to public scrutiny and releases the documents filed by both companies. When the deal was rejected late last year, the CRTC pointed out the combined company would have controlled more than a quarter of all commercial radio revenues in Canada, more than the next two radio broadcasters' revenues combined.
"It's clear enough that they will need to sell some of those stations," said Troy Crandall of MacDougall, MacDougall & MacTier. "I expect they'll want to keep the best ones and sell off some of the others, but they haven't made it clear what the plan would be."
That may be their preference, but it may not be enough to appease regulators. When the deal was before them in September, the CRTC took issue with the way Bell offered to carve up its radio holdings with an emphasis on unloading some of its less-desirable stations. It also scolded Bell for not providing enough information on how it planned to manage its sprawling radio network, something the media giant isn't likely to repeat when it unveils its latest takeover offer.
That could open the door for a company such as Newcap to scoop up assets that don't come on the market very often.
Newcap, which has been in Alberta since 1987, said there seems to be willing buyers for its assets although it hasn't yet received any offers. It would like to have a deal in place by the end of the quarter, Mr. Steele said, which would also include the company's two Lloydminster television stations.
"We've had a good run," said Mr. Steele, whose company posted a $1.1-million profit in its most recent quarter. "But I think now is a good time to sell when there's an appetite for acquisitions."
Potential buyers include the Jim Pattison Broadcast Group, which owns 29 stations and has expressed an interest in expanding in western Canada; multi-millionaire retired Bay Street trader Mike Wekerle, one of Newcap's largest shareholders and an unsuccessful bidder for a Toronto FM radio license last year; and the Thomson family, whose holding company Westerkirk Capital last year bought Vista Radio and now controls a network of 47 stations in B.C., Alberta, Ontario and North West Territories.