BCE Inc. (BCE), Canada’s largest telecommunications company, amended its takeover plan for Astral Media Inc. (ACM/A) after the initial proposal was blocked by regulators in October amid concerns it would harm competition.
The new proposal keeps the amount payable to Astral shareholders the same, the companies said in a statement. Holders of Class A and B shares will receive cash or a combination of cash and as much C$750 million of BCE common shares, or C$50 and C$54.83 a share, respectively. The C$3.38 billion ($3.39 billion) deal must be approved by Canada’s broadcast and antitrust regulators.
Under the amendments, BCE’s regulatory covenants have been modified to include viewership share criteria and an outline of tangible benefits to consumers. The renewed effort to make the deal happen underscores the desire both companies have to add scale, said Gavin Graham, president of Graham Investment Strategy, a Toronto-based investment consulting firm that advises clients such as mutual funds.
“Even with Astral’s French-language assets, BCE will still be No. 2 to Quebecor by a long way,” Graham said in an interview, referring to the Montreal-based owner of Quebec’s TVA television network and Videotron cable company. “This may be one of the reasons why BCE agreed to do this revised deal.”
The Ottawa-based regulator said on Oct. 18 that the deal raised concerns about competition, ownership concentration in television and radio, and the exercise of market power, with the two sides differing in how they calculated market share.
The deal would have given BCE a 42.7 percent share of the Canadian English-language television market and 33.1 percent of the French-language market, the CRTC said.
BCE today said its resubmitted offer “addresses the commission’s concerns and sets out the steps the companies would take to comply with the relevant viewership thresholds,” according to the statement.
The new proposal for Astral, a broadcaster and owner of billboards, includes viewership of media properties jointly owned with other companies in its calculation of market share, while excluding viewership of U.S. channels.
“They are doing the right thing to submit, they had a good case the first time around,” said Charles Boyer, a Montreal- based telecommunications consultant and former vice-president of the Canadian Association of Broadcasting.
Astral’s board of directors has also declared a cash dividend of 50 Canadian cents a share to holders of record at the close on Jan. 15.
Astral rose 3.1 percent to close at C$45.78, and BCE was little changed at C$42.01 today.
Both companies agreed to extend the so-called outside date, the deadline for the takeover to be completed, until June 1. The previous extension was set to expire Dec. 16. BCE and Astral each has the right to further postpone the deadline until July 31.
In the initial March 16 plan, BCE agreed to pay C$50 a share for Astral, a 38 percent premium over the previous day’s closing price. That exceeded the 26 percent average premium paid by media companies globally in the last five years, according to data compiled by Bloomberg. Astral soared 34 percent on the day the transaction was announced.
Last month’s rejection marked the first major decision by Jean-Pierre Blais, the new head of the Canadian Radio-television and Telecommunications Commission, who claimed the BCE-Astral transaction wouldn’t be a good deal for Canadians.
BCE, the owner of the CTV television network, lacked French content other than French sports channel RDS. Adding Astral would bolster that content, Vice Chairman Martine Turcotte said in March.
Some of the assets BCE may have to give up include the half share of Teletoon, and the Family Channel, which they share with Corus Entertainment Inc. (CJR/B), said Graham. And Rogers may pick up some English-language networks, he said.
“So it’s not quite as good a deal for BCE, but two-thirds or three-quarters of a loaf is better than none,” said Graham.
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