April 12 (Bloomberg) -- Chum Ltd., owner of eight Canadian television stations, agreed to buy closely held Craig Media Inc. for C$265 million ($199 million) to gain a foothold in Alberta, Canada's fastest-growing TV advertising market.

Toronto-based Chum is gaining stations in Calgary, Edmonton and the Manitoba cities of Winnipeg and Brandon, along with the digital TV channels MTV, MTV2 and TV Land. The company will sell Craig's Toronto1 station after it struggled to attract advertising.

Chum Chief Executive Jay Switzer's acquisition of Canada's largest closely held TV broadcaster takes his company beyond its base in Ontario and into Canada's most robust provincial economy. Alberta will outpace Canada's other nine provinces this year with 3.5 percent growth, the Conference Board of Canada said.

``They're attractive assets,'' said Monique Malo, an analyst at TAL Global Investment Management, which holds Chum shares. ``It allows them to become a national network.''

Switzer said in an interview that he expects TV advertising sales in Alberta to increase 6 percent to 7 percent in the current fiscal year, compared with a maximum of 1 percent growth nationwide.

Gaining Ground

The purchase brings Chum closer to its larger competitors in Canada, including the government-owned Canadian Broadcasting Corp., BCE Inc.'s CTV, and CanWest Global Communications Corp.'s Global Television Network.

Chum, which will finance the purchase with bank debt, already owns stations in Ontario cities such as Toronto, Ottawa, and Barrie, as well as two stations in British Columbia, Canada's westernmost province. It operates MuchMusic, Canada's dominant music channel.

Speaking on the conference call, Switzer said there will be cost savings as the Craig stations use programming for which Chum has already purchased the rights for national use. He didn't quantify those savings.

Craig had been seeking bids of about C$400 million, the Globe and Mail reported in January. The newspaper, citing a potential bidder who didn't want to be named, said the price was too high because of losses at Toronto1 and digital channels.

Some analysts said Chum still paid too much.

``I think the price is high,'' said David McFadgen, an analyst at Sprott Securities in Toronto, who has a ``buy'' rating on Chum and doesn't personally own the shares.

Toronto1

Craig Chief Executive Drew Craig said his company was hurt by lack of advertising at its newest station, Toronto1. The Craig family owns 80 percent of Craig Media, while Providence Equity Partners Inc. owns a 20 percent stake.

``Things were certainly challenging for the company,'' he said in an interview. ``We decided to address that issue by looking for strategic alternatives.''

Possible bidders for Toronto1 may include Torstar Corp., publisher of the Toronto Star newspaper. Torstar and CanWest lost against Craig for the Toronto TV station license in 2002. Torstar spokeswoman Catherine Yates didn't immediately return a call seeking comment.

Chum traces its roots to 1954, when it acquired the CHUM-AM Toronto radio station. The company, in which the founding Waters family holds about 89 percent of the common shares, has a market value of about C$831 million. The common shares last traded April 5 for C$31.

The company's earlier attempt to expand in Alberta was stymied in February when the national media regulator rejected a plan to open stations out of concern it would hurt local competitors.

The Canadian Radio-television and Telecommunications Commission must approve the Craig purchase. Philippe Tousignant, a spokesman for the CRTC, couldn't immediately be reached for comment.

In the year ended August 31, Chum had net income of C$25.4 million on sales of C$540.5 million. Craig doesn't publish financial results.

TD Securities is advising Chum and RBC Capital Markets is providing advice to Craig.

To contact the reporter on this story: Catherine McLean in Toronto at mclean@bloomberg.net.

Last Updated: April 12, 2004 16:25 EDT