Source: dealReporter

BCE’s revised bid to acquire Astral Media (TSE:ACM.A) has better chances of securing regulatory approval this time around, stakeholders and antitrust attorneys said.

The acquisition of Montreal, Quebec-based Astral by telecom and media leader BCE received conditional Competition Bureau (CB) approval on 4 March. Two days later, Canada’s media regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), made BCE’s revised proposal to acquire Astral public and announced a 30-day comment period. The CRTC denied an earlier application by the same parties in October 2012.

To satisfy competition concerns of the CB, BCE announced plans to divest 10 of Astral’s television channels and 10 radio stations. It also announced Chorus Entertainment would acquire some of the assets for USD 494m.

BCE and Astral both declined to comment for this story.

Two antitrust attorneys following the situation said the revised proposal looks very different from the initial plan submitted last year. BCE has done its homework, due diligence and established trust with regulators, the first attorney said.

Further, the tone of the proposal is different from before. BCE has wrapped itself in the language of the consumer, and responding to consumers, the first attorney said. “They are appropriating that voice from the commission and calling it their own,” said the attorney, adding that the language was likely to give the regulator much more comfort.

The second attorney commented: “Bell must be pretty comfortable with the prospects for approval this time.”

Ian Morrison, spokesperson for Friends of Canadian Broadcasting, an independent broadcast watchdog, said he thinks that BCE has a good chance of getting approval because BCE has likely “cleaned up the garden and arranged more completely and fully to meet the tests the regulator has laid out.”

Still, Morrison said he expects the CRTC to hear the case on its merits, listen to concerns and ask a lot of questions. He added that the regulator has set a precedent with the earlier rejection and it has to be consistent in its decision-making.

The CB required BCE to agree to significant divestitures in order to preserve competition in the supply of television programming services to distributors, as well as protect innovation and consumer choice.

The divestitures put Astral/Bell just slightly above the 35% threshold for total audience viewing whereby the CRTC, according to its policy, would process the transaction expeditiously. The original deal gave BCE a 42.7% market share, a big concern for the CRTC.

During the first review, competitors raised vertical concerns about BCE becoming a bigger supplier of programming, while also being a key competitor in the distribution of media through its telecommunications business.

Both attorneys said the CB’s decision to place behavioral restrictions on the way BCE will be allowed to negotiate distribution rights, in addition to divestitures, will likely satisfy a majority of the CRTC’s competition concerns.

The CB’s behavioral remedies will restrict the CRTC in applying its own vertical integration test, these attorneys said. “It removes a significant chunk of concern [for the CRTC],” the second attorney said.

The first attorney noted that the CRTC’s previous decision to block the transaction was replete with competition concerns, but he said that now that the CB has ruled it will be hard for the CRTC to require more concessions from BCE.

The CRTC will likely focus on non-vertical concerns, the second attorney said. These would include its Diversity of Voices policy, which reviews programming and plurality of editorial voices, as well as the tangible benefits policy, which requires transacting parties to invest a portion of the transaction value back into the broadcasting system.

BCE has left no stone unturned in demonstrating how its proposal fit within the CRTC’s policies, said the first attorney. The company has even proposed to go further than what the CRTC requires in its policies related to carriage of content, although it is unclear exactly what it is offering and how much of it is new.

The same attorney thought BCE may be simply enshrining its behavioral remedy with the CB in its proposal to the CRTC.

 Stakeholders, including customers, competitors and consumer groups, are now scrambling to respond to Astral/BCE’s lengthy proposal within a short comment window given by the CRTC.

 Robert Cazelais, executive director of Option consommateurs, a not-for-profit consumer organization based in Montreal, Quebec, said it took considerable resources for his organization to review the proposal last year and now they will have to go through the same process again. Option is still reviewing details of the new proposal, he said.

 The position of many consumer-based opponents of the transaction is that BCE is already too big and any additional concentration in the media space is too much. At the same time, there is a certain resignation that with the revised proposal the deal is already “fait de complete,” said a third industry source.

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