CanWest's Pursuit of Alliance Atlantis Communications Reaches Crucial Stages

Strategic Insights -

Winnipeg-based CanWest, in partnership with the private equity arm of Goldman Sachs Group Inc., is on the verge of acquiring Alliance's 13 specialty TV offerings, including Showcase and History Television, in a potential $2.1-billion takeover. The deal would see CanWest become a major player in the consolidating sector, surpassing rival CTVglobemedia Inc.'s recent acquisition of CHUM Ltd. for $1.4-billion.

The pursuit began last August, when CanWest Global Communications Corp. teamed up with a top New York investment bank to make a pre-emptive strike on Alliance Atlantis Communications Inc. After a competitive bidding process, CanWest and Goldman emerged as the leading contenders, securing Alliance's 50-per-cent stake in the top-rated CSI crime dramas. Alliance's 13 specialty channels and a 51-per-cent stake in Motion Picture Distribution LP, a publicly traded income trust, are also up for grabs.

Key Takeaways:

  • CanWest and Goldman Sachs are in the final stages of negotiations to acquire Alliance Atlantis Communications Inc.'s 13 specialty TV channels, including Showcase and History Television, in a potential $2.1-billion takeover.
  • The total bid values Alliance's 50-per-cent stake in the top-rated CSI crime dramas at over $100 million, with CBS Corp. owning the other half.
  • Alliance's 51-per-cent stake in Motion Picture Distribution LP, a publicly traded income trust, is also part of the deal.
  • CanWest's goal is to own the specialty channels with minimal debt, with the structure of the deal flowing from this objective.
  • The partnership with Goldman allows CanWest to wash its hands of CSI, while also providing greater flexibility in financing the acquisition.
  • Alliance's board has a fiduciary duty to get the best offer, and may consider selling the specialty channels to Corus and CSI to CBS and Movie Distribution to Goldman Sachs, depending on the best offer.
  • The sale process is expected to be complex and may take some time to complete.

Statistics:

  • Potential takeover value: $2.1 billion
  • Number of specialty TV channels: 13
  • Price per share: over $50
  • Alliance's 50-per-cent stake in CSI value: over $100 million
  • CBS Corp.'s half of CSI stake: unknown
  • Alliance's stake in Motion Picture Distribution LP: 51%
  • Expected sale of Australian TV assets: $1.5 billion

Sources:

  • "CanWest zeroes in on Alliance Atlantis deal," The Globe and Mail
  • "CanWest and Goldman Sachs in talks to acquire Alliance's specialty TV channels," The Toronto Star
  • "Alliance Atlantis might be sold before Network Ten is sold," Desjardins Securities