Source : Globe & Mail

Partnership eyes 13 TV channels and CSI; more offers expected to be made next week

One of the biggest players in private equity, Goldman Sachs & Co., has teamed up with CanWest Global Communications Corp. to make an offer for Alliance Atlantis Communications Inc., according to media and investment banking sources.

With bids for Toronto-based Alliance expected to land next week, CanWest and Goldman have formed a partnership that would see the Canadian media company purchase Alliance's 13 specialty television channels. Goldman's private equity group is considering either an outright purchase of Alliance's 50-per-cent interest in the lucrative CSI criminal drama TV franchise, or a loan to CanWest backed by the CSI stake.

Together, the pair could offer up to $2.1-billion for Alliance, which was formally put up for sale in December, according to investment banking sources. CanWest and Goldman declined to comment yesterday.

Analysts have previously said that Alliance's specialty TV channels, which include Showcase and History Television, are worth up to $1.5-billion.

CSI, which is co-owned by CBS Corp., is harder to value, but is likely worth between $700-million and $800-million.

"For CanWest, teaming up with Goldman means taking on far less debt, and neatly dealing with CSI, an asset they don't want," said one Bay Street media analyst who asked not to be named.

Winnipeg-based CanWest and the New York investment bank are not expected to be the only bidders to raise a hand in this auction. Astral Media Inc. and Corus Entertainment Inc. are also preparing bids, sources say, and cable rivals such as Rogers Communications Inc. and Quebecor Inc. are seen as outside contenders.

One analyst said: "Astral and Corus seem to have the biggest strategic motivation as bidders, as everyone else looking at Alliance has shown they can carry on without specialty television."

In addition, several private equity firms are taking a look at all or part of the Canadian company. With this cast of players, other group offers for Alliance are likely.

Teaming up to bid on Alliance would satisfy the wishes of company founder and chairman Michael MacMillan and his colleagues, as Alliance executives have privately told potential bidders that they would prefer to sell the entire concern in one go, rather than break it up and sell the pieces over time. The problem facing Mr. MacMillan is no one bidder puts a premium value on all of its divisions.

Alliance was founded in 1978 by Mr. MacMillan and four film school friends. It revealed last month that the founders had "recently sought expressions of interest from selected potential buyers as to their interest in purchasing [Alliance]."

Alliance also holds a 51-per-cent stake in Motion Picture Distribution LP, a publicly traded income trust. That stake is worth $166-million and is expected to be sold by any domestic rival who buys the specialty channels.

Alliance class B shares closed down 2 cents yesterday at $49.98 on the Toronto Stock Exchange after peaking last week at $51. If Mr. MacMillan and his colleagues do decide to sell -- they hold voting control of the company -- analysts forecast Alliance will fetch between $52 and $55 a share, or between $2-billion and $2.2-billion.

Alliance and its financial adviser, RBC Dominion Securities Inc., are pushing potential bidders for their best offers by the end of next week, according to sources at rival media companies.

Goldman's private equity group consists of 75 professionals who have worked on deals around the world. They posted record revenue of $2.82-billion (U.S.) last year, largely on the back of successful investments in Chinese banks. Goldman raised a $6.5-billion fund focused on infrastructure plays and is in the process of raising a $10-billion fund.

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