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Industry Spotlight - M&A activity is top story for Canada’s broadcast sector

|Written By Geoff Kirbyson
Industry Spotlight - M&A activity is top story for Canada’s broadcast sector

There’s no rest for counsel working at media broadcast companies across the country. The current acquisition- and consolidation-happy environment keeps in-house counsel on their toes and they say there’s no sign of things slowing down in the near future.

When you’re an in-house counsel in the lightning-fast-paced media-broadcasting sector in Canada, you can’t take anything for granted these days — not even your own summer holidays.


Corporate lawyers for some of the biggest companies in the country had so much on their plates in June, July, and August that they missed out on trips to cottage country and other warm-weather pursuits to work on closing industry-transforming deals.


Richard Leipsic, senior vice president and general counsel at CanWest Global Communications Corp., the Winnipeg-based media giant that owns television stations and newspapers across the country, says he’s been working around the clock to finalize the $2.3-billion acquisition of Alliance Atlantis Communications Inc.


The blockbuster deal was announced in conjunction with United States-based Goldman Sachs Capital Partners in January. Leipsic says the recently completed privatization of the company’s newspaper income fund has also been one of his primary focuses.


“It’s been a perfect storm. Every member of our head office is contending with the fact there are no shore leaves until these deals get done. We’re waiting for next summer,” he says.


The addition of Alliance Atlantis will combine CanWest’s specialty television operations, such as TVtropolis, Lonestar, and mentv, with Alliance Atlantis’s own History Television, Showcase, and the Food Network.


A number of CanWest’s recent acquisitions, including radio stations in Turkey, have been around the globe. It also sold a pair of radio stations in Canada and converted debenture holdings in Australia-based Ten Network Holdings into a voting position.

Leipsic says having so many foreign entities under the CanWest umbrella creates a number of challenges for in-house counsel. First, they’re not particularly attuned to the local laws, so it takes longer to digest them and formulate opinions in the different jurisdictions, he says.


“We rely extensively on well-founded and long-standing relationships with local counsel. We get regular updates on media law
changes, too,” he says.


Considering Ten Network is halfway around the world, Leipsic says he often starts communications with his Australian counterparts at 6 p.m. Central Standard Time and finishes them when most people in his time zone are sound asleep.
“You can find yourself in a position of working some pretty peculiar hours to work in real time,” he says.


Leipsic says the closing agenda for the Alliance Atlantis deal has 1,800 steps attached to it and part of his role is to ensure the various components interact properly with each other. He says he doesn’t expect the pace to slow down appreciably in the near term.


“Six months from now we’ll probably have three or four other transactions in various stages of execution,” he says.


Gary Maavara, vice president and general counsel at Corus Entertainment Inc., which has its executive head office in Toronto, says he expects the consolidation activity in the industry to remain steady.


“As we move into an environment that’s increasingly dominated by digital interactive media, the ability to create and acquire intellectual property requires great resources. You need to be big to do that,” he says.


Corus, which owns radio stations such as CJOB in Winnipeg, CKNW in Vancouver, CKAC in Montreal, and television stations such as YTV and the W Network, bulked up last month when it spent more than $14 million to buy CJZZ 99.1 Cool FM in Winnipeg and Kitchener, Ont.’s CKBT 91.5 The Beat from CanWest. The move signified CanWest’s exit from Canada’s radio business, while Corus took another step toward its goal of increasing its radio presence in large Canadian cities.


But the wheeling and dealing doesn’t end there. Last year, CTVglobemedia, operator of 21 conventional television stations across Canada and interests in 15 specialty channels, made a huge splash with its $1.4-billion acquisition of CHUM Ltd. The Canadian Radio-television and Telecommunications Commission ruled this summer that CTV had to sell off five Citytv stations to satisfy ownership concentration requirements to complete the deal.


The quintet, which are located in Toronto, Winnipeg, Edmonton, Calgary, and Vancouver, were subsequently purchased by Rogers Communications for $375 million.


If more evidence is needed to prove just how big the industry has become, Statistics Canada recently reported that the television broadcasting industry in 2006 saw the third-largest year-over-year increase in operating revenues over the past decade. Revenues were more than $6 billion, a jump of more than eight per cent in 2005, while advertising revenues hit the $3.3-billion mark in 2006, a 7.6-per-cent increase over the previous year.


Much like the consolidation activity, Maavara says his work is “all over the map” and includes organic development as well as acquisition-related work.


He says in-house counsel are involved in much of the negotiations before a deal is closed, determining elements such as the cash balances and which entity is responsible for what actions in the agreement — all of which can have a significant effect on the ultimate purchase price.


“It’s just like a real estate transaction. Are there taxes owing? Are the utilities paid for? There can be a lot of issues like this for a company. What’s the working capital? How do you adjust the purchase price accordingly?” he says.


Maavara says there are certain formal steps that need to be taken with closing a transaction, such as assessing whether a confidentiality agreement should be signed.


“You want to ensure somebody isn’t signing a non-disclosure agreement to get information. With confidential information, you want to ensure the proposals being presented to the company are being done in a formal manner so people don’t accuse you of stealing an idea you already had,” he says.


Andrea Wood, executive vice president and general counsel for Alliance Atlantis, says the company’s team of 15 lawyers, who are spread out in Dublin, Los Angeles, and Toronto, are busy helping CanWest’s people understand exactly what they’ve purchased.


“We’re assisting the buyers understand which of our companies do what things, which contracts reside in which companies, and which assets need to be transferred where as part of the transaction,” she says.


“Our role is to help the business people understand some of the risks associated (with the acquisition). We’re trying to ensure the deal is executed in a way that fulfils the best interests of the business,” she says.


A good deal of her time is also spent managing the lawyers under her charge. She’ll look at their work, give them feedback on dangers to avoid on particular deals, monitor workloads, and manage the departmental budget. As a member of the senior management committee, she’s also involved in business decisions affecting the company.


She says she expects to see “a lot more” consolidation in the industry in the near term, and that’s going to trickle down to affect in-house lawyers themselves.


“It may mean there are fewer jobs at senior levels within the industry, or it could be the nature of the jobs available will change. I’m not sure which yet,” she says.


She says one of the challenges in the current acquisition-happy environment is the company’s day-to-day operations don’t take a rest. License agreements for products for its channels still need to be negotiated, as do international distribution contracts for its CSI television franchise.


Maavara says in-house counsel also concern themselves with making sure as many people as possible on both sides of an acquisition are comfortable when the dust settles.


“When closing a deal, you want to make sure you have all of the elements for the people who are staying taken care of, such as their compensation and their vacation time owing, so they don’t feel left out of the process,” he says. “It’s really important to make the new people feel important as they’re coming into your company.”


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