Source : Variety

TORONTO In the Great White North's increasingly consolidated media market, pundits are fingering Alliance Atlantis as the nexttakeover target, with CanWest Global Communications as the likely buyer.

"Not a question of 'if' but 'when,' " Merrill Lynch analyst Ihor Danyliuk said in a recent note to investors. Danyliuk predicts AAC could go on the block as early as a year from now.

Recent moves by both companies appear to underline his prediction.

Toronto-based Alliance Atlantis, an entertainment company that operates 13 specialty channels, has traditionally been an acquirer. Even when the company ankled the production business (its super-lucrative stake in "CSI" notwithstanding) in order to become a broadcaster, it did so by winding the business down rather than selling it.

The Oct. 20 announcement that it is putting controlling share of its distribution business, Motion Picture Distribution Income Fund, on the block is the first time the company has divested itself of a major asset.

A surprise announcement Oct. 31 that the Canadian government will introduce taxes on income trusts led the MPD share price to drop 3.9%, but Danyliuk told investors that he stands by his note.

Danyliuk noted the potential "dressing up" of the parent company in preparation for selling.

The decision rests with one man; Michael MacMillan, who, as AAC's controlling shareholder, has his finger on the trigger.

"Given (MacMillan's) stepping down from the CEO position last year, AAC's slowing growth, lack of any appreciable share price appreciation over the past two years, and the recent acquisition of Chum and possible additional Canadian media consolidation in the next 12-24 months, it may be time" for him to sell, writes Danyliuk.

Canada has long been a territory with more buyers than sellers. With the acquisition in the summer (pending regulatory approval) of Chum by Bell Globemedia, parent company to CTV, rival CanWest Global Television has new incentive to make a move.

The conventional television market is mature and slow to grow, and not only has CanWest been trailing CTV in the ratings for some years, but with a relatively small stable of nascent specialty channels, the company has plenty of catching up to do in the rapidly expanding specialty market.
CEO Leonard Asper has himself pledged to invest in higher-growth segments of the media business.

Although it has gone deeply in debt to buy into newspapers, CanWest is looking into unloading its lucrative 56% stake in Ten in Australia following regulatory changes there regarding cross-media ownership. The market value of that share is C$1.5 billion ($1.325 billion), enough liquidity to knock on AAC's door.  

Not that it would be the only one knocking. Competing suitors would include deep-pocketed Astral Media and cable giant Rogers Communications.

© Variety