Canada's Cable-Publishing Merger Is Born of Necessity
CANADA's largest cable company and its largest publishing company will soon be joined to form a communications giant whose cable television services will reach one-third of all Canadian subscribers.
A $3 billion (Canadian; US$2.21 billion) bid by cable giant Rogers Communications Inc. was approved by Maclean Hunter Ltd.'s board of directors on Tuesday. Now the deal must pass muster with Ottawa regulators looking at its impact on cable-industry competition.
Despite the publishing company's earlier resistance and accusations of ``greenmail'' in response to Rogers's $17-a-share bid, Maclean Hunter sealed the deal when the cable company boosted the bid to $17.50 a share. ``We are gathered today to announce that two great companies have reached an historic agreement to come together,'' said Ted Rogers, chairman of the cable company. Mr. Rogers has said Canada's cable companies need to be larger to compete with multimedia conglomerates in the United States.
Maclean Hunter chief executive Ronald Osborne, who had responded to Rogers's aggressive tactics by saying he would not make any deal with ``a loaded gun'' to his head was also magnanimous. While acknowledging the loss of independence for the 107-year-old company, he said the merger made strategic sense.
Maclean Hunter publishes 191 periodicals and 62 other publications in Canada, including the national news weekly Maclean's. It owns one TV station, 21 radio stations, and 61 percent of the Toronto Sun publishing company, which publishes the Financial Post and four other newspapers.
But what Mr. Rogers wanted most was Maclean Hunter's crown jewel - its cable television subsidiary that is Canada's fourth largest. Maclean Hunter has 690,000 cable subscribers in Canada and 534,000 in Detroit, New Jersey, and Florida. The US holdings will likely be sold off to finance the deal.
When Maclean Hunter's cable holdings are added to the 1.8 million Rogers subscribers, the combination will be powerful in Canada. It will give Rogers a head start in creating Canada's own information superhighway. The merger was also necessary to compete with phone companies and with direct broadcast satellite television in the pipeline, officials said.
Rogers only wants to end up with about $500 million in additional debt when all is said and done, says Peter Legault, a media analyst with Thomson Kernaghan & Co. Ltd in Toronto. That likely means selling off some magazines or newspapers. Rogers had hoped to get US$1.5 billion for the US cable assets. But when the US Federal Communications Commission rolled back cable rates, the value of US assets fell by 10 or 15 percent, he says.
The deal must still be approved by the federal Bureau of Competition Policy that will assess whether the merger creates an unacceptable monopoly. Also, the Canadian Radio and Television Commission will weigh any adverse effects on cable subscribers, a process that could take as long as two years.