BCE to Buy Canadian Broadcaster CTV for $3.1 Billion
CTVglobemedia CEO Ivan Fecan
Norm Betts/Bloomberg
Ivan Fecan, chief executive officer of CTVglobemedia Inc.
Ivan Fecan, chief executive officer of CTVglobemedia Inc. Photographer: Norm Betts/Bloomberg
Sept. 10 (Bloomberg) -- BCE Inc., Canada’s largest telephone company, agreed to buy the shares of broadcaster CTV it doesn’t already own for C$1.3 billion ($1.26 billion) to increase its video offerings for digital TV and wireless subscribers.
BCE is paying investors including the Thomson family’s Woodbridge Co. cash and stock for 85 percent of CTV, the company said in a statement today. BCE, based in Montreal, will also assume C$1.7 billion in debt.
The addition of CTV and its specialty and sports channels allows BCE to add more broadcast content under its Bell brand and compete with rivals Rogers Communications Inc. and Shaw Communications Inc., which bought Canwest Global Communications Corp.’s television assets this year.
“The change in the industry in the last 24 months from technology and ownership of content has been very, very different from anything we’ve seen in Canada before and we believe we are set up very well,” BCE Chief Executive Officer George Cope told analysts on a conference call today.
Cope has cut jobs and other costs as BCE’s landline phone business shrinks, and is putting those savings into adding content it can sell on smartphones and the Internet.
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“The business of communications is changing rapidly. It’s no longer about black rotary dial telephones,” said Iain Grant, managing director at Seaboard Research in Montreal. “I think they’ve actually figured that out. It’s about delivering other things.”
In the U.S., Comcast Corp. made a similar move by agreeing to buy control of NBC Universal Inc. from General Electric Co. in December. The deal allows the largest U.S. cable operator to promote its programming on NBC’s broadcast network, distribute more movies on-demand, and have better control of how cable content is distributed over the Internet.
“Bell felt it necessary to obtain majority control of CTV to ensure that it is not left behind” as its Canadian competitors beef up their own content, said Maher Yaghi, an analyst at Desjardins Securities in Montreal. Yaghi, who has a “hold” rating on the stock, said BCE’s price is comparable to what Shaw paid for its Canwest assets.
BCE rose 14 cents to C$32.99 at 4 p.m. in Toronto Stock Exchange trading. The shares have gained 14 percent this year.
Thomson Takes Globe
Woodbridge, which is the holding company for the Thomson family and controls Thomson Reuters Corp., will buy the Globe and Mail newspaper from CTV parent CTVglobemedia Inc. in a separate transaction, with BCE retaining a 15 percent stake in the Toronto-based paper.
Ivan Fecan will step down as CEO of CTV after a transition period, Cope told CTV’s Business News Network channel today in an interview. He declined to say when that would be or whether a successor would come from inside CTV or BCE or from somewhere else.
BCE said it will fund the acquisition with a bank facility of C$2 billion, C$750 million in new BCE shares that will be issued to Woodbridge and surplus cash on hand.
Current CTV shareholders include the Ontario Teachers’ Pension Plan, which would receive about C$382 million for its 25 percent stake, based on the BCE purchase price. Ontario Teachers, Canada’s third-biggest retirement fund manager, bought a 20 percent stake in Bell Globemedia Inc. from BCE for C$283 million in December 2005. Ontario Teachers added a 5 percent stake a year later.
Torstar Sells
Torstar Corp., owner of the Toronto Star, the country’s largest newspaper, agreed to sell its 20 percent stake in CTV for about C$345 million, the company said in a statement. Torstar and Ontario Teachers’ also sold their Globe and Mail stakes to Woodbridge, which has had an investment in the 166- year-old paper since 1980. Torstar jumped 21 percent, the most since at least 1988, to C$12.
CTV has more than 5,000 employees and operates 27 television stations across the country, 30 specialty channels including the sports channel TSN and 34 radio stations across Canada. The broadcaster had sales of C$1.87 billion and profit before interest, tax, depreciation and amortization of C$385 million in the year through Aug. 31.
The deal echoes moves by former CEO Jean Monty who formed Bell GlobeMedia in 2000 as part of a C$13 billion expansion into the media business. Michael Sabia, his successor and Cope’s predecessor, cut BCE’s stake in Bell GlobeMedia to 20 percent in 2005 as he unwound that expansion.
“They spent nine years trying to get away from that vision, but I think that Monty was right,” said Grant.
Penny Dropped
Owning content today is much more appealing and potentially lucrative with the proliferation of new media, Cope told journalists on a conference call. Back then “content was only available on one screen, now it’s available on three screens, if not four,” he said.
Bell realized the potential for television during February’s Winter Olympics in Vancouver, which Bell sponsored, Cope said.
“The penny dropped at the Olympics,” he said. “It was the first time we saw these new technologies and the impact they had” on mobile phones, the Internet and TV, he said.
To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net
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