Source : Canadian Business Magazine

Craig is on the block after watching Toronto 1's poor performance

It wasn't supposed to end this way, though some media watchers suggest it was inevitable. When Calgary's Craig Media won the coveted licence for a Toronto analog station in April 2002, the privately held broadcaster beat out Torstar, Alliance Atlantis and CanWest. Feisty Craig wanted to show the moguls out East that it knew a thing or two about TV, too. After all, it owned successful stations in Calgary, Edmonton, and Brandon, Man., and four digital licences, including MTV Canada.

So when Toronto 1 finally hit the air Sept. 19, CEO Drew Craig (who owns the 50-year-old media dynasty with brothers Boyd and Miles) was brimming with optimism--despite some hiccups, including appeals of the CRTC's licence decision from Toronto-based CHUM Ltd., among others.

A few months later, Craig is on the block, due largely to Toronto 1's poor performance--reports suggest ad sales in its first year will be half the $35 million Craig was hoping for. Some analysts suggest the decision was likely spurred by U.S.-based Providence Equity Partners, which bought a 19.9% stake in Craig last March for $110-million, looking to cash out when it saw that Toronto 1 wasn't living up to its promise. There's also speculation that Craig Media has had to dig deep into its $35-million senior debt facility from RBC Capital and BMO Nesbitt Burns to cover startup costs. While reports say Craig could go for anywhere from $130 million to $400 million, National Bank Financial analyst Adam Shine suggests that $165 million to $240 million would be more realistic. Anything over $200 million, a sum exceeding what CHUM is rumoured to have offered two years ago, would reflect just how valuable that Toronto licence is.

Both CHUM and CanWest have applied to the CRTC for additional TV licences in Alberta. If they come through, Shine says it could knock up to $50 million off Craig's value. If CHUM fails, however, it could bid for Craig itself.

Other potential bidders include Quebecor, with an IPO of its media assets expected in the next few months, and Alliance Atlantis, which is staking its future on broadcasting. Torstar, owners of the Toronto Star, would likely just want Toronto 1, estimated by Shine to be worth anywhere between $50 million and $80 million. Rogers might see the acquisition as a way of bulking up its media unit (which owns Canadian Business) before spinning it off.

Some say the sale is long overdue, artificially delayed by winning the Toronto TV licence. But Drew Craig, who's just 45, has always been determined to build on the broadcast empire his grandfather founded. This time, however, the underdog doesn't come out on top.

© Canadian Business Magazine