Source : Victoria Times Colonist

Analyst says taxes charged by CRTC will boost cost

Canadian Press

The $1.5-billion price tag that CanWest Global Communications Corp. (TSX:CGS) attached to the specialty TV purchase from Alliance Atlantis (TSX:AAC.B) doesn't include taxes charged by the CRTC, documents have revealed.

A material change filing released to Canadian securities regulators shows that the original cost of the cable TV assets announced last week by CanWest CEO Leonard Asper is "exclusive of CRTC and certain other charges." The company didn't disclose what "other" charges might be considered.

The revelation caused Desjardins Securities analyst Carl Bayard to issue a report to investors on yesterday saying that "while it may originally have appeared that CanWest picked up the Alliance specialty [assets] on the cheap, such does not appear to be the case."

Bayard said in the note that, based on the estimated 10 per cent tax charge that the CRTC generally implements on regulated television asset, the total price should increase by $125 million to $150 million.

CanWest spokeswoman Deb Hutton told The Canadian Press that it hasn't been determined exactly how the CRTC taxes will affect the transaction and said the CRTC doesn't always tax transactions at 10 per cent.

"I would caution people to say that's not necessarily what it's going to look like," she said.

Last week, CanWest announced that it would join Wall Street investment bank Goldman Sachs Capital to buy Alliance in a deal worth $2.3 billion, of which $1.5 billion is for the Alliance specialty TV channels.

The Canadian media giant said it would initially put up about $132 million cash as well as its Global television network for a 17 per cent stake in the specialty channels. CanWest says it plans to buy full ownership of the specialty channels from Goldman by 2011.

The entire deal is pending several approvals, including those of the CRTC.

If the deal gets a green light from the regulator, CanWest will face the additional taxes.

Westwind Partners analyst Ben Mogil said he wasn't surprised by the filing, saying he "always understood the tax was something CanWest was going to be paying as part of the overall transaction."

CanWest shares closed at a 52-week high yesterday, up 56 cents to $11.69 on the Toronto Stock Exchange.

Alliance was down two cents to $51.74.

© Victoria Times Colonist