Source : Globe & Mail
Skeptics may consider it a figurehead job, but those in the know say it's anything but
Lawyer John McKellar is about to step into a new, unlikely role: that of media mogul.
As Bell Globemedia's $1.4-billion takeover of CHUM Ltd. begins to wend its way through the protracted regulatory process, CHUM shares will be placed in the hands of an independent trustee.
Beginning in September, Mr. McKellar, a senior lawyer at WeirFoulds LLP in Toronto who was picked for the trustee job last month, will become the official gatekeeper of these assets until regulators make a ruling on the deal.
His job will be to watch over the company's expansive roster of radio and TV operations, ensuring they are preserved until the deal is consummated. But Mr. McKellar, the father of Toronto actor and playwright Don McKellar, will effectively control a large cluster of broadcast assets, from MuchMusic to SexTV to the Space Channel.
It's not often that the arcane world of trustee law becomes so glitzy. In fact, trustees themselves rarely have much to say about the job at hand -- their role is to remain in the background of the deal.
Mr. McKellar declined an interview for this article, but over the next eight months -- or longer, depending on how long it takes the Canadian Radio-television and Telecommunications Commission to assess the deal -- he will play an integral role.
During that time, Bell Globemedia (BGM) will have no access to the CHUM assets. In the case of BGM, CEO Ivan Fecan will be given monthly updates on CHUM's financials, but will not be able to influence company decisions.
Trustees aren't required to be lawyers, though often they are. Most importantly, candidates must clear two key hurdles when names are put forward to the regulator.
"Our criteria is they have to be independent and knowledgeable," CRTC spokesman Denis Carmel said of the trustee process. "They have to be able to administer the company independent of the buyers." The process was created to ensure public companies could be sold and shareholders are promptly paid while the regulator probes the deal.
Selecting a member of the Order of Canada, such as Mr. McKellar, is a common theme. Former high-ranking CRTC officials also show up in the circle of trustees who shepherd assets.
Pierre Juneau, the CRTC's first chairman who is also a member of the Order of Canada, served as trustee on Cogeco Cable Inc.'s 1996 acquisition of Ontario cable assets from Rogers Cablesystems.
Skeptics could be inclined to view the trustee as a figurehead, but former holders of the title say the job is anything but. Since the rules require the buyer and the seller to keep a safe distance, the trustee is a crucial go-between whose personal integrity relies on that process.
"The hardest part for me was to make sure I didn't do anything to damage my personal reputation," said Purdy Crawford, a senior lawyer at Osler Hoskin & Harcourt LLP, who served as a trustee on a telecom deal in the late 1990s.
Trustees can also play a major role in takeovers that are subject to another area of market scrutiny, competition law. The federal Competition Bureau, which guards against excessive industry concentration and reviews about 300 deals a year, typically takes much longer to authorize a transaction than the parties require to close it.
Often the bureau will issue a "hold separate" order on the assets under review. This permits the buyer to complete the acquisition and the vendor to get paid while preventing the buyer from interfering with operations. In contrast with media asset trustees such as Mr. McKellar, trustees in competition cases are usually business people with managerial experience.
One of the best-known competition trustee cases arose in 2001 when Indigo Books & Music Inc. consummated a hostile takeover of Chapters Inc. As part of a deal with the Competition Bureau, Heather Reisman, Indigo's CEO, temporarily stepped down and handed the management reins to Michael Budman, a friend and co-founder of the Roots Canada clothing chain.
A trustee can also play a role after a review if the bureau decides assets must be divested to preserve competition. Companies will typically get a period of three to four months to auction off the assets. But if no buyer comes forward, the bureau will appoint a trustee -- usually an accounting firm -- to conduct an auction. The bureau will also typically appoint a monitor to ensure the parties don't exchange sensitive information, such as pricing.
Brian Facey, a competition partner at Blake Cassels & Graydon LLP in Toronto, says he expects to see a growing role for trustees and monitors because of the current trend in competition circles toward fixing the deal before it's presented to the Competition Bureau for potentially lengthy review.
"Given proper competition advice up front, you should have a pretty good sense of what you're going to have to divest, if anything, so you want to factor that into the purchase price and you want to factor the outcome into the timing of the deal," he says.
"It's interesting. How do these deals get done when the regulatory time frame does not meet up with the business-reality time frame? The trustee and monitor are really the grease that make that whole thing happen."
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