Source: National Post

NEW YORK -- Canwest Global Communications Corp. and Shaw Communications Inc. said they plan to co-operate in negotiations with Goldman Sachs after the Wall Street investment-banking giant blasted the two Canadian media companies for negotiating a sale behind its back.

Goldman is a key constituent in any restructuring of Canwest's television assets because of its ownership stake in 13 specialty channels which the bank and Canwest acquired from Alliance Atlantis Communications Inc. in 2007.

In a pointed missive over the weekend, Goldman lawyers said they were "gravely concerned" that Canwest had entered into a deal to be acquired by Shaw without its knowledge.

"This is nothing short of a surprise attack that is in flagrant violation of the terms governing the discussions between [Goldman] and the noteholder committee," the letter, which was included in a filing by the court-appointed monitor yesterday, said. "The flawed process that has led to this very unfortunate breach must be remedied."

Goldman's legal team said the bank isn't necessarily opposed to the deal, which will give Shaw at least a 20% equity stake and 80% voting interest in Canwest's television business.

Goldman "has not taken a position on the Shaw proposal, most obviously for the reason that neither Shaw nor CanWest have told us anything about it," the letter said. "[Goldman] is open to meeting with Shaw at any time and as soon as can be arranged."

Goldman added that it shouldn't be restricted from discussing the restructuring with Shaw or other potential suitors and that Canwest should provide the bank with complete information on other takeover alternatives that Canwest considered besides Shaw.

RBC Capital Markets, Canwest's financial advisor, has been searching for months for an equity investor to take a stake in the media company. An ad hoc committee of senior subordinated noteholders made the equity investment a requirement before the broadcast assets can emerge from creditor protection.

Specific financial terms of the deal have yet to be revealed, except that Shaw is getting its stake for a minimum of $65-million.

The court-appointed monitor, FTI consulting, said in yesterday's filing that attempts to resolve issues regarding Goldman are a "difficult process."

The Monitor, Canwest and its bankers and noteholders said they consider Shaw's bid the "best overall offer."

The deal would help the debt-laden Canwest emerge from creditor protection, while Shaw would add wildly popular TV shows such as Glee and 24 to its stable of cable, satellite and wireless assets.

An analysis from BMO Nesbitt Burns estimated that cable giant Shaw is paying about $100-million for the acquisition.

The filing also disclosed a $5-million break-up fee to be paid by Canwest if the deal doesn't go through.

Merger and acquisition experts said the small fee - which might not seem much of a deterrent to a rival suitor - is in line with the deal's relatively small price tag.

The modest fee also could signal that Shaw isn't worried about competitors because Canwest's broadcast assets have been shopped for months without suitors emerging.

Under the terms of the deal, Shaw also is entitled to a $2.5-million "reimbursement fee" if the deal is terminated or once it closes as planned.

Once part of Canwest Global, the National Post and other Canwest newspapers fall under a separate holding company, Canwest Limited Partnership and aren't affected by the deal with Shaw. Secured lenders for the publishing division, led by Bank of Nova Scotia, are leading a separate auction for the newspaper assets.

© National Post