Astral: The Canadian media player to watch

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One evening last summer, Goldman Sachs managing director Gerry Cardinale flew in to Montreal from New York and made his way to Ristorante Bice, one of the city's most glamorous meeting spots.

Cardinale had never met his dinner companion before. The burly Philadelphia-born Wall Streeter was conversant about the Canadian media industry, since he had helped finance CanWest Global Communications' purchase of specialty channels owned by Alliance Atlantis two years earlier. But Cardinale didn't know much at all about Ian Greenberg, the CEO of Astral Media Inc.

As the two men chatted casually over their Italian dinner, Cardinale got Greenberg's message. It was simple enough. CanWest, they both knew, was now struggling to stay afloat in a sea of debt. And, Greenberg said, should Goldman Sachs want to sell off its stake in the partnership with CanWest that owns profitable cable channels such as HGTV, Showcase and Food Network, Astral was interested.

Far short of putting an offer on the table, Greenberg just wanted Goldman Sachs to know one thing: If you're going to do business in the Canadian media sector in the next few years, you should get to know Astral. And you should get to know me.

Then Greenberg brought up a favourite topic: food. When things are going well at Astral, he suggested to Cardinale, he eats more. "That's why I've put on all this weight." Astral was shortly to announce its 52nd consecutive profitable quarter.

Greenberg is looking to expand at a time when many of Canada's better-known media companies are contracting. The build-out began with his $1.1-billion purchase of Standard Broadcasting in 2007. The deal took the company to No. 1 in private-sector radio nationally, giving Astral some of the most popular stations in their respective markets, such as Calgary's CJAY 92 and Winnipeg's Hot 103.

Meanwhile, in its guise as one of Canada's biggest billboard companies, Astral quietly won the city of Toronto's "street-furniture" contract for bus shelters and billboards. Over the next 20 years, the deal is worth $1.5 billion in projected revenue.

And alongside those two moves, Astral, which is also a player in specialty and pay-TV, has aligned itself with some powerful global media brands. It has put the Virgin name on several of its radio stations and been given access to the iconic Disney brand for specialty TV properties such as Playhouse Disney. Greenberg also struck a deal to bring HBO into the country as a dedicated channel for the first time.

Not that Astral has been wholly immune to the effects of the recession. As other broadcasters began re-evaluating the worth of their assets last year, so too did Astral, booking a $317-million writedown on the value of radio properties acquired in a more heated market. Investors who were otherwise fleeing the media sector seemed not to care, however. The company's shares went up the day news of the writedown was released in October.

Here's why: Despite purchasing Standard, which brought Astral's national roster of radio stations to 81, the company has kept its debt far lower than its peers. To take a drastic example, when CanWest filed for protection from creditors last fall, its ratio of debt to EBITDA (earnings before interest, taxes, depreciation and amortization) was approaching 6:1. Astral's ratio has hovered around 2:1, and Greenberg figures it will drop lower in 2010. The company isn't tied down by leverage the way its rivals are.

In fact, when the credit crisis hit in the fall of 2008, seizing up bank lending, Greenberg dipped into Astral's cash reserves to pay off debt. He was sending a message to his lenders: Here's some cash now when you need it, but remember this when we come knocking.

Age 67 may seem late to be coming out as a media mogul. And Greenberg is entering a field full of outsized personalities-Rogers, Asper, Péladeau, to name a few-that have been difficult not to know. But as Type A media empires stumble during the recession, Greenberg's low-key record of profit and prudence suggests he truly is the guy to know.

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The Astral war room is Greenberg's cozy, dimly lit office at the company's Montreal headquarters. With drawn shades and plush couches, it looks more like a lounge than an executive suite. Here, Astral's moves are plotted weekly by Greenberg and Sidney Horn, a lawyer at Stikeman Elliott who acts as Greenberg's consigliere. In the late afternoon, as they relax with cigars, Greenberg pulls out a notepad of ideas he has scribbled down over the course of the week and bounces them off Horn. "My involvement is to ask him questions, to test him," Horn says. "Does this deal really make sense? Why do you want it? Are you sure this is good for the company? Convince me."

The bond between the two formed in the early nineties after Greenberg went off to a three-month executive course at Harvard University. He returned to discover that a deal had been botched in his absence. In buying a small video production firm, NPA Video, Astral executives hadn't done all their due diligence, and the company overpaid dramatically.

Greenberg found out the name of NPA's lawyer-Sidney Horn-and called him up. He informed Horn that Astral had been ripped off, and suggested that maybe the two of them should meet to discuss a compromise. Horn looked over the file and agreed: The numbers weren't right. After a revised deal was worked out, Greenberg decided that this straight dealer was the guy he wanted as his own lawyer.

If that sounds old-school, Greenberg probably wouldn't mind the label. His is a family business, one whose humble beginnings come straight out of a Mordecai Richler novel.

A 15-minute drive from Astral's offices stands the squat brick building where Greenberg and his siblings were raised-a family of 10 packed into a three-bedroom rental on Rue St. Cuthbert, within smelling distance of the famed Schwartz's deli.

The family was poor. Abraham Greenberg was a municipal bailiff whose job was to collect on unpaid utility bills. Applying for the apartment, his wife, Annie, was careful to never mention how many children they had, fearing the family would be turned away. The four boys slept in the master bedroom, two to a bed.

The family was close. At school, Ian, the slight and studious one, was protected by his more substantial older brother, Sidney. "People say, 'Were you close because you all got along so well?'" Greenberg says. "Frankly we were close because we were never invited anywhere. Ten people is a lot."

Greenberg's first job was as a "puller," standing outside his uncle's department store. If a customer perused a hat in the window, young Ian, no more than 11, would tell her about the fantastic selection of millinery the store offered, then lead her by the hand to the appropriate aisle. The family rule was that each son would hold down a job; and for every three dollars earned, two would go to Annie for the household.

When Annie died in 1961, Ian and his three brothers, Harold, Harvey and Sidney, were confronted with a sudden need for a life plan. Ian was just 19; his brothers were all in their 20s. None of them had cash. While sitting shiva, the brothers decided they had to go into business together. "We said: What can we possibly do to keep this family together, to make sure that without our mother-who was kind of the glue for all of us-that we didn't each go our own way," Greenberg says.

Two of the older boys had worked in a camera store as teenagers, which led to the idea of getting into the expanding business of photo processing. Using a $15,000 loan from Sidney's future father-in-law, the brothers started Angreen, a film processing business named after their mother.

The Greenbergs scored a coup by obtaining exclusive rights to sell photo products at Expo 67. Building on that success, the brothers bought film distributor Astral Communications in 1973. Meanwhile, the photo-processing operation evolved into a new concept-a retail chain, Astral Photo, that grew to 120 outlets between Quebec and Alberta in the eighties.

Astral expanded into other ventures, including distributing Disney movies in Canada on videocassette and taking up movie production. The company scored one hit in 1982-Porky's, the coming-of-age sex comedy that long stood as the highest-grossing Canadian film-but lost money on most of its other movies.

In the early eighties, the TV industry started hybridizing, as the rabbit-ears menu of stations that earned their money strictly from advertising expanded up the dial to include channels that relied on steadier sources of income: fees from cable viewers. From the beginning, Astral's interest in TV has been predicated on this model. The company got control of struggling pay-TV operator First Choice in 1983, and then secured licences to operate specialty TV stations such as Family Channel.

The addition of those properties signalled the emergence of a new version of Astral that Ian began assembling in earnest in 1995, after taking the reins from an ailing Harold, who died the following year. Recognizing that videocassettes and photofinishing were sunset businesses, Greenberg began selling off assets. Astral used the cash to launch its first foray into radio two years later, buying 25% of Radiomutuel Inc., which owned 11 stations in Quebec and several specialty TV channels. (Astral purchased the remainder of the company in 1999.)

Greenberg remembers the reaction he got, as a new, untested CEO, when he announced his intended focus to the Astral board. "I told them what I wanted to do, and they sat there, a little stunned," Greenberg says. "I said: This is going to be a pure-play media company, we're going to exit every other business, and I want to do it all within a year."

Lawyer Horn isn't surprised that Greenberg exhibited such resolve, even back then. "He is a very disciplined buyer and a very disciplined seller. He knows why he is making a sale, he knows why he is making a purchase," says Horn. "He won't all of a sudden fall in love with the transaction and do it at any price, just to make sure that he gets it."

This reticence has cost Greenberg deals. Two years ago, Toronto-based broadcaster CHUM came up for sale. Greenberg had long coveted assets like MuchMusic, Bravo and other specialty stations, but backed away when CTVglobemedia Inc. bid up the price to $1.4 billion in a frothy market that is just a memory now. He knew his price, and wasn't prepared to overstep. "Had CTV stopped before we did, perhaps we might own it today," Horn says.

Now Astral is in a better buying position: Assets are apt to come on the market and competitors don't enjoy the same latitude to make acquisitions. In the industry, Greenberg is viewed as the dealmaker to watch. It's true Corus Entertainment, the broadcasting offshoot of Shaw Communications, has also told Goldman Sachs it's interested in the CanWest specialty TV channels should they go up for sale. But Greenberg was the first to reach out, the first to strike up a relationship-and he's the most likely to move quickly if a deal presents itself.

Greenberg is ready to tender an offer if anything he likes-that is, specialty TV, radio or billboards-comes up for grabs. "We kind of work in reverse," Greenberg says. "We think: Where are we going to go in the future? If we want to do certain things, which companies will be targets?" Astral knows it can capitalize on the media sector's retrenchment. "We do all this work so when assets come up, we are able to react pretty quickly. We have a book on just about every competitor out there."

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Then the Greenbergs ventured into pay-TV movie channels, buying First Choice along with Premier Choix in Quebec, the business was bleeding about $2 million a month as it battled for market share with rival pay-channels. The Greenbergs had an idea about how the struggling business-and the struggling sector-could be made profitable. If they could strike an arrangement where Astral would take Eastern Canada, and the last surviving player out west (Movie Central, as it's now called under owner Corus) would take that market, each company would be in charge of a financially viable regional monopoly. Regulators were bent on upholding competition. But the Greenbergs reckoned, correctly, that the officials in Ottawa would eventually agree to the plan rather than see the whole industry implode.

The bigger problem was that the Greenbergs lacked money to do the deal. They needed $8 million. "And I needed it fast because First Choice was going down so quickly," Greenberg says. "They started to get these letters from the studios: If you don't pay within 24 hours, we're withdrawing the movies. A pay-TV service without movies is pretty tough to operate."

Enter the Bronfmans. Harold had

known the storied, deep-pocketed family-specifically, the side headed by Edward and Peter Bronfman-since the sixties. Because the money was needed in such a hurry, the Greenbergs agreed to some unusual terms to get the Bronfmans' backing. If the strategy fell through, and the pay-TV operation went under, they would lose their company. All the shares held by the Greenbergs in Astral were put up as collateral.

Greenberg says it wasn't that difficult a decision to make. "When you have nothing, you have nothing to lose," he says. "We were involved in those days in production, making movies. We made one hit-Porky's-but we had 20 losers before that. If we continued making movies, I was personally convinced we'd go bankrupt.

"There was no way to know for sure we were going to turn it around, but HBO [the first North American pay-TV company]had been successful in the United States, so I thought: At least I've got a chance."

Today, the Bronfman family still has a seat on Astral's board. Jack Cockwell, the legendary adviser to Peter and Edward Bronfman, is also on the board. Cockwell, who helped construct the Brascan and Brookfield empires, is one of two people whom Greenberg, who dropped out of university when his mother died, cites as his profs in Real-Life Business 101. (The other is Austin Beutel, the chairman of private investment firm Oakwest Corp. and an Astral board member.)

The longevity of the Bronfman-Greenberg alliance speaks to Greenberg's old-school emphasis on personal bonds. When executives from Disney and HBO talk of their relationship with Astral, it's Greenberg they're talking about. Since 2007, both companies have let Astral take control of their brands in Canada, which is unprecedented. Normally they, and their brethren, demand an ownership stake. "We're mercenaries, but we're a little careful about the army we fight with," says Charles Schreger, HBO's president of programming sales. "Had Ian not been the general, I don't know if there would be an HBO Canada."

When the federal broadcast regulator decided in 2005 to offer a licence for a new pay-TV operator in Canada, several hopefuls lined up for the opportunity. HBO was smart enough to know that the value of its programming, with a reputation built on hits like The Sopranos and Sex and the City, had just gone up. HBO began demanding more and more money from Astral for its services, threatening to jump to one of the new licencees. "Our job is to extract as much out of every market as we can," says Schreger. "And when you're the prettiest girl, everybody wants you on their arm. Now did we use all that courting to our advantage? Absolutely."

Negotiations with Astral included a lunch in a 14th-floor private dining room at HBO's New York headquarters. Schreger wasn't sure how the Canadian CEO would respond to his demands.

He soon found out. Greenberg sat glaring at him from across the table, not touching his lunch. "It just kind of sat right there on the table," Schreger says with a laugh. "It sat there, and he looked around. Ian was not going to eat. And when Ian doesn't eat, it's bad news."

"He does take things personally," Schreger continues. "He got pretty outraged a couple of times about what we asked for. You don't want to test your most aggressive number with Ian." He jokes that the CEO's approach becomes "some combination of moping and outrage" when things don't go his way. Greenberg abhors being squeezed. "He'll look at you like, 'How can you do this to me?'" Schreger says. "It's pretty effective."

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In the heart of downtown Montreal, Place Montréal Trust soars from the street like a rose-coloured castle. Built in 1988, the skyscraper houses a sprawling shopping mall with a five-storey water fountain-the tallest in North America-and full-size trees growing in the lobby. This is the type of building where big companies reside. And in the coming months, it will be given a new name: Maison Astral.

The change will coincide with the relocation of Astral Media, as it uproots itself from a small shop on the fringes of downtown to a landmark building in the heart of the city. For Astral to go slapping its name on a skyscraper is a telling shift from its otherwise low-profile existence in the Canadian media sphere.

Of all the changes the company has gone through, buying Standard Broadcasting from the Slaight family is the one that made Astral national. The radio business is not complex. Proprietors like Astral build their chain and try to sell ads across many markets, while also taking advantage of radio's local feel. Though radio has been hit hard by the recession, it has proved more resilient than TV on the ad front, since its relatively cheap time still appeals to small businesses like restaurants.

Building a national profile for Astral is a much tougher job, however. Before Greenberg agreed to buy the Slaights' Toronto-based empire, most of Astral's radio properties were in Quebec and the Maritimes. Now it has stations in almost every corner of the country, and with that comes challenges. Though well known in Montreal and Toronto, the name Astral draws a blank in most of Canada.

Integrating Standard's 52 radio stations into Astral's operations has been a massive job. And beyond logistical issues, introducing the Montreal company to a large swath of Western Canada has not been easy. "I think it's a big challenge, no question about that," Astral chairman André Bureau says of the transformation.

Astral's chief marketing officer, Alain Bergeron, is attempting to create a single, universally recognizable brand for the new company. He hired Walter Werzowa, the man behind the "Intel bong" (the little fanfare that features in all Intel ads), to devise an instant audible identity for Astral. The Los Angeles-based composer came up with a snippet that can be tailored to each outlet: twangy for country stations, heavy guitar for rock stations, plinking xylophone for the children's TV channels such as Playhouse Disney.

And the version with triumphant trumpets? That will depend on how far the youngest son manages to take the legacy of Annie Greenberg.