Source : Globe & Mail

$400-million price deemed steep; bidders may include Quebecor, CHUM, Alliance Atlantis

The Craig family has put Craig Media Inc., Canada's biggest privately held television broadcaster, on the auction block.

Drew Craig, president and chief executive officer of Calgary-based Craig Media, has retained RBC Dominion Securities Inc. to find buyers for some or all of the company. A trade sale to a rival broadcasting group, as opposed to an initial public offering, is thought by insiders to be the preferred route.

"In anticipation of consolidation in the industry, we are working closely with our financial adviser . . . to consider a wide range of strategic opportunities available to Craig Media that would strongly position the company for the future," Mr. Craig said.

Providence Equity Partners Inc. of the United States, which owns 19.9 per cent of Craig Media, declined to comment.

Sources close to both said Mr. Craig and RBC have been "shopping" the company for at least a month and have received many expressions of interest.

The sale of Craig Media would mark the end of a Western Canadian media dynasty. Johnny Craig, grandfather of Drew, started Craig's forerunner in Brandon, Man., 56 years ago. The company is now tightly controlled by Drew and his brothers, Boyd and Miles. Craig Media owns A-Channel Calgary, A-Channel Edmonton, A-Channel Manitoba, CKX-TV in Brandon and Toronto 1, the local TV channel that has been on the air since September. It also owns three national digital TV channels.

One of the potential bidders for Craig Media, who did not want to be identified, said Mr. Craig and Providence were hoping to get about $400-million for the whole company. The source, though, said the amount was far too high, given the losses at Toronto 1 and the digital channels.

Another source said an initial sounding of the market showed buyers are more comfortable with valuations in the $200-million range.

Toronto 1 has fared poorly. Sources said the channel will be lucky to have advertising sales of $17-million or so in its first year, only about half of the projected $35-million or so.

One analyst estimated Craig Media's EBITDA -- earnings before interest, taxes, depreciation and amortization -- is about $11-million a year. Putting a 12-times multiple on the figures suggests the company is worth about $130-million. But the access to the rich Toronto advertising market through Toronto 1 might raise the price considerably.

Quebecor Media Inc., owned by Quebecor Inc. of Montreal, is thought to have a lot of interest in Craig Media.

Quebecor would like to add some weight to its media division before its expected initial public offering later this year.

Other interested companies might include Toronto's CHUM Ltd., owner of CITY-TV, and Alliance Atlantis Communications Inc., also of Toronto, which is pinning its future on broadcasting as it gets out of the production business. Sources said Torstar Corp., the Toronto Star owner that competed for the Toronto 1 licence, is not interested in buying Craig Media, but might try to buy Toronto 1 from the new owners.

The fact that Toronto 1 is now for sale marks a striking reversal of fortune for a station with whose ownership was hotly contested just 18 months ago.

Industry heavyweights Alliance, CanWest Global Communications Corp. and Torstar all made unsuccessful pitches to the Canadian Radio-television and Telecommunications Commission for the rights to start the channel. The CRTC decision in favour of Craig Media, in April, 2002, was derided as politically motivated, aimed at propping up a marginal Western Canadian broadcaster.

"The general sense of the market right now is there's more buyers of Canadian media than sellers, so Craig's timing might be good," said one investment banker who works in the sector.

Providence put $110-million of fresh equity in Craig Media last March. Another $35-million in senior debt came from RBC Dominion Securities Inc. and BMO Nesbitt Burns Inc. The money was used, among other things, to launch Toronto 1. It is understood that Providence's investment is secure. The original plan for Craig Media would have seen debt paid off, and Providence cash in, by way of an IPO.

CRAIG MEDIA INC.

HOLDINGS

TV stations; A-Channel Calgary; A-Channel Edmonton; A-Channel Manitoba; CKX-TV Brandon; Toronto 1

Digital TV specialty services; MTV Canada; MTV2; TV Land and will launch a Western themed channel this year called Stampede.

Digital cable channel

HEAD OFFICE

Calgary

OWNERSHIP

80% owned by brothers Drew, Boyd and Miles Craig; 19.9% by U.S. based Providence Equity Partners Inc.

PRESIDENT & CEO

Drew Craig

HISTORY

Minor league hockey goalie Johnny Craig bought into Brandon Radio station CKX in the mid 1940's

Son Stuart Craig who died in 1999, expanded into TV in the 1950's and was an early entry into digital cable, setting up Skycable in Manitoba in the early 1980's.

Grandson Drew Craig led the company's entry into the Ontario market with the launch of Toronto 1 in 2003.

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