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Astral CEO Ian Greenberg speaks at the company's AGM in Toronto, Dec. 13, 2011.

Frank Gunn/Frank Gunn/The Canadian Press

To win over management of Astral Media, George Cope and his team at BCE couldn't just promise to offer shareholders a sweet premium. They had to prove that a combination made more sense than any other pairing – as well as offer up a board seat to Astral's chief executive officer.

As revealed on a conference call Friday, Astral had other approaches, but the Montreal-based firm ultimately chose to tie the knot with BCE . "We've thought about this for a few months and we had certain approaches," said Astral CEO Ian Greenberg. "We chose Bell because we thought it was the best fit, particularly for our people."

Because a strategic pairing only goes so far, BCE had to make sure it offered up a fair value. To do that, it modelled a bid off of its acquisition of CTV Inc. In that deal, BCE paid about 10 times earnings before interest, taxes, depreciation and amortization, and now Astral is getting the same multiple.

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The financing arrangement to fund the deal is also very similar to the CTV transaction. BCE has signed a three year credit facility worth $3.5-billion, and plans to draw $2.6-billion from it, boosting its debt-to-EBITDA multiple from 2 times to 2.25 times. If things go according to plan, borrowed money will be paid back within 24 months. (The remaining portion of the $3.4-billion price tag will be funded through equity and debt financings.)

So what does BCE see in Astral? In one word: Quebec. Mr. Cope noted that while the CTV deal offered up some national stations, the real focus of that deal was sports. This time around, national channels such as HBO and The Movie Network are included again, but beefing up Bell's Quebec television presence is the main driver. Combined, Bell and Astral will have a 32 per cent market share in French language television, only slightly behind Quebecor, which has a 35 per cent share.

Because TV is the focus, can we assume that Astral's outdoor media unit is chopped liver? Not at all, said Mr. Cope. In fact, telcos are one of the biggest users of outdoor media, so the deal creates some nice vertical integration in this space.

"There are no assets at the moment that we consider here non-core," Mr. Cope said, adding: "One of the areas where we see media growth is in the outside asset."

Before the transaction can go through, BCE needs approval from the CRTC and the federal Competition Bureau. The firm said it expects those within six months of submitting its applications for review – again, the same as the CTV deal.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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