Source : National Post

CHUM, Torstar, Quebecor all 'want to get bigger'

Broadcasting underdog Craig Media Inc., which has tried and failed to find a place in the crowded Toronto television market, will likely set off a flurry of consolidation in the media sector this year.

The Alberta-based broadcaster has hired an investment banker to find a buyer for the business, which includes A-Channel stations in Calgary, Edmonton and Manitoba, a station in Brandon, Man., and the fledgling Toronto 1 TV station.

Craig, which will attract interest from the likes of Quebecor Inc. and CHUM Ltd., is up for sale at a time when most media companies have recovered from over-priced acquisitions of a few years ago and have cleaned up their balance sheets.

"The media sector is hot. It's going to be a fun year," said one media analyst. "All these companies want to get bigger, and they are saying the right things, 'we are buyers, we want to do add this, we want to look at specialty,' or whatever."

Already this week Torstar Corp., touted as a potential purchaser of Toronto 1, has announced the departure of Toronto Star publisher John Honderich, which is part of a larger power struggle at the company and is expected to lead to cost-cutting at its flagship newspaper.

BCE Inc. is also expected to sell all or the majority of its Bell Globe Media assets, which includes the CTV television network and the Globe and Mail newspaper.

"We note that the purchase of Craig could very well reinitiate or hasten the next round of consolidation," Ihor Danyliuk of Merrill Lynch said in a research note yesterday.

Sources say Craig Media has been put in play because of the lacklustre launch of its Toronto I station, which began broadcasting saddled with a weak mix of programming, and has been unable to generate the level of advertising sales it was aiming for.

Those financial difficulties could put a sale in the $200-million range -- much lower than the $400-million apparently hoped for by its financiers, Providence Equity Partners, which holds a 20% interest in Craig. Last March, Craig secured a $110-million cash injection from U.S.-based Providence Equity Partners Inc. and a $35-million senior debt facility provided by RBC Capital Markets and BMO Nesbitt Burns. Providence wound up with a 19.9% stake in Craig through the investment.

The opportunity to buy into an existing TV network is rare one, and even more uncommon is the chance to enter the Toronto market, one analyst noted.

"It's a rare opportunity to buy a conventional network in Canada. A lot of people will look at it just because it is a very scarce thing," he said. "Any [company] with some kind of critical mass of media would really have to do some work to make sure it does make sense for them to expand when this kind of chance comes around."

Craig Media was granted a licence two years ago for Toronto 1 from the Canadian Radio-television and Telecommunications Commission, besting competitors like Torstar and Alliance Atlantis.

Similarly, it is not easy to enter the Alberta TV market. "It is early and we don't know too much. But clearly, we have an obvious interest in this development and we are watching things very closely," said Jay Switzer, chief executive of CHUM Ltd., which has been trying to enter the Alberta TV market through licence applications.

Possible deals and combinations are the topic of conversation among executives at Canada's broadcasting, newspaper and entertainment companies, and investment bankers are working overtime conjuring up sales, offerings and spinoffs.

"There's not a quarter that goes by that any of us in the business aren't being talked to about various combinations and permutations," John Cassaday, chief executive of Corus Entertainment Inc., said late last year after an investor conference.

MEDIA ASSETS SWEEPSTAKES: 2004 is shaping up to be the year several media empires could see radical transformation:

PIERRE-KARL PELADEAU - QUEBECOR

Quebecor Media Inc.'s expected IPO is hotly anticipated now that the company has moved back in the black. Funds raised by the IPO could strengthen QMI's balance sheet and allow it to buy back up to 35% of its remaining $1-billion in high yield debt. Assets include Sun Media Corp. and French language broadcaster TVA Group Inc.

DREW CRAIG - CRAIG MEDIA

Craig Media Inc., the country's largest privately held TV broadcaster, is for sale either to a competitor or through an IPO. Its assets include the just-launched Toronto 1, A-Channel stations in Calgary and Edmonton and digital specialty channels such as MTV2.

ROBERT PRICHARD - TORSTAR

The resignation of Toronto Star publisher John Honderich this week capped a long running power struggle between him and CEO Robert Prichard. While insiders say cost-cutting will be a direct result of the departure, any sale or merger of Torstar would be complicated by the company's unusual ownership structure.

ALLAN WATERS - CHUM

There is ongoing speculation CHUM Ltd. and its properties, which include Citytv, MuchMusic and 30 radio stations, will be sold or merged. Allan Waters, founder and controlling shareholder is expected to soon pass control to his sons and that could result in CHUM assets being put up for auction. Media companies, including Astral Communications Inc., Corus Entertainment Inc. and CanWest Global Communications Corp. are believed to be interested in some or all of CHUM 's broadcast properties.

MICHAEL SABIA - BCE

BCE Inc. is understood to be preparing to sell some or all of its 68.5% control in its Bell Globemedia television and newspaper company this year, sources say. Speculation of a sale of such assets as CTV Television Inc., the Globe and Mail newspaper and the Sympatico-Lycos Internet portal was bolstered late last year when it was learned the nine-member board of directors for the subsidiary was disbanded, creating a deep rift between the parent company and its media arm.

CONRAD BLACK - HOLLINGER

Conrad Black is waging war with shareholders over their control of his newspaper empire which includes London's Daily Telegraph, the Chicago Sun- Times and the Jerusalem Post. While Britain's Barclay brothers have tabled an offer to buy Lord Black's control stake in the assets by purchasing parent firm Hollinger Inc. outright, the board of subsidiary Hollinger International is trying to auction off the assets itself.

© National Post