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In the Media

article imageCanWest Global Communications Corp. acquired Hollinger newspaper chain

WINNIPEG - CanWest Global Communications Corp. today announced the largest
transaction in the history of the Canadian media industry. CanWest, owners of
Canada's most popular national television network, Global Television, has agreed
to acquire 100% of the principal metropolitan operations of the successful
Hollinger newspaper chain in Canada, together with all of its Canadian Internet
properties, its magazine group, most of the community publishing operations and
a 50% interest in the National Post. The merged company will have complete and
unparalleled national and local coverage in both electronic and print media,
plus the canada.com network, a leading group of national and local Internet
sites.
Valued at $3.5 billion, the transaction will see the reunion of two of
Canada's most successful entrepreneurs, Israel Asper, Executive Chairman of
CanWest, and Conrad Black, Chairman of Hollinger Inc., who did their first
deal 22 years ago when CanWest acquired Crown Trust on a handshake between
Mr.
Asper and Mr. Black. Hollinger will become CanWest's second largest
shareholder, after the Asper family.
CanWest will pay cash of $2.2 billion and approximately $600 million in
the form of 24.3 million Non-Voting Shares valued at $25 per share and 2.7
million Multiple Voting Preferred Shares at a premium of $3.75 over the
price
of non-voting shares, from its treasury to the Hollinger group as
consideration for the acquisition of the print and Internet assets,
described
in the Backgrounder attached to this news release. As well, the vendors will
take back a 10-year subordinated debenture in the amount of $700 million.
Financing for the transaction has been underwritten by a consortium co-led
by
the Canadian Imperial Bank of Commerce and the Bank of Nova Scotia.
The purchase price is based upon a valuation of 10X year 2000 earnings
(EBITDA) for Hollinger's principal print assets with certain adjustments.
CanWest believes that the adjustments on closing will reduce the price to
approximately 9.5X earnings before corporate efficiencies.
CanWest believes that post-2000 efficiencies to be gained in the merger
will result in annual savings of between $50 and $150 million, which should
make the transaction accretive to cash earnings per share by the end of
fiscal
2002.
The transaction will see Hollinger acquire a 15% share and just under a
6% voting interest in CanWest. Two Hollinger executives, including Mr.
Black,
will join the expanded 11 person CanWest Board.
"This union of Hollinger's popular and profitable Canadian publishing and
Internet assets with CanWest's powerful television broadcasting properties
is
a tremendous deal for CanWest and its shareholders, " said CanWest Chairman
Israel Asper. "The merger is a giant step forward in securing a bright
future
for a vibrant and independent Canadian media sector. It's also a great day
for
Canadian journalists, who will have more opportunities than ever before to
tell Canadian stories to Canadians across the country."
Hollinger Chairman Conrad Black said, "This deal represents a remarkable
merger of successful entrepreneurial cultures that can only magnify the
prospects of our joint endeavours. The Hollinger print and Internet
properties
bring to CanWest the proven and extremely valuable additional content,
financial, technical and market capacity to enable CanWest to forge ahead on
innovative business solutions for advertisers in the new-media
environment."
Specifically, and in addition to 50% of the National Post, the
transaction includes 13 large metropolitan English language dailies;
approximately 136 daily and weekly newspapers and shoppers in smaller
communities; 85 trade publications and directories in the Southam Magazine
and
Information Group; and, all of the Hollinger and Southam Internet
properties.
The merged assets do not include Hollinger's French language newspapers and
certain of its other non-metropolitan properties that Hollinger has
indicated
it will selectively sell or retain.
"This merger is the ultimate convergence transaction. It unites the
powerful conventional media of print and electronic content with the 21st
century online, interactive and immediate technology of the Internet." said
Leonard Asper, President and Chief Executive Officer of CanWest. "With this
enormous mass of news, information and entertainment content, plus a merging
of Hollinger's successful canada.com, careerclick.com, and carsclick.com
sites, together with Hollinger's newspaper sites, canada.com's city portals
and our existing globaltv.com and specialty content web sites, CanWest is
poised to take a leadership position in media convergence, technological
revolution and interactive new-media with absolute confidence."
Tom Strike, CanWest's Chief Operating Officer, who led the negotiation of
the final deal with Hollinger, following the handshakes of the Aspers with
Mr.
Black on the concept, said, "This development will eventually change the
ways
that Canadians routinely access news, information and entertainment, conduct
business communications and even the way people shop. This historic union of
leaders in their sectors will position CanWest to walk confidently on the
information highway, regardless of which delivery system eventually becomes
dominant in the marketplace.
Ravelston, Hollinger's parent company, has, at CanWest's request, agreed
to remain in management of the wholly-acquired publications for at least 17
months, in order to maintain continuity and to provide time to work out an
orderly transition plan for full integration of the assets with those of
CanWest. The Hollinger Internet properties will be integrated with CanWest
immediately upon closing.
As well, as part of the partnership, Hollinger will continue to manage
the National Post for the next five years, to enable that newspaper to
realize
its potential to become Canada's most profitable national newspaper, before
turning the newspaper over to joint CanWest/Hollinger management. However,
cross-fertilization between the National Post and The Global Television
Network will begin immediately. Mr. Black will continue as Chairman of the
National Post. CanWest will appoint a co-chairman, with equal representation
from CanWest and Hollinger on its Board of Directors.
The National Post is treated separately from other Hollinger newspaper
properties in this transaction. In recognition of its value as a highly
successful national newspaper, still in a start-up phase, the National Post
will remain a stand-alone publication jointly owned by CanWest and
Hollinger.
Each party will hold 50% of the company. It was agreed that Mr. Conrad Black
will remain Chairman of the National Post for the next five years.
The transaction is subject to regulatory approval, including by the
Canadian Competition Bureau, to which application for approval has already
been made. As well, during their next license renewals, CanWest's Canadian
television broadcasting properties will seek to reassure the Canadian Radio-
television and Telecommunications Commission (CRTC) that this transaction
will, in no way, diminish the diversity of Canadian voices, choices and
editorial opinion in the interpretation of Canadian and international news
and
information to Canadians.
Israel Asper, who conceived and initiated the merger terms with Mr.
Black, said, " We are well aware of, and sensitive to, the public policy
concerns about cross-media ownership. We intend to meet with the CRTC
immediately to discuss how best to ensure that the public interest is
protected, while not foregoing achievement of the corporate efficiencies of
this media convergence transaction. As well, we will meet with provincial
premiers and mayors across the country to assure them of our ongoing
commitment to balance and diversity of editorial voices in the local media.
We
also look forward to discussions with the relevant labour unions to solicit
their support in modernizing the Canadian communications industry and
equipping the industry to prosper and provide more good jobs in the
challenging times ahead." (cnw)
article:31763:0::0
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