It was the largest and most complex transaction in Canadian broadcasting history. As well, Maclean Hunter Ltd.’s $606million purchase of Selkirk Communications Ltd. last December and its quick resale of some of the Selkirk assets for $310.5 million were widely hailed as a strategic breakthrough for the Toronto-based communications company.
The arrangement will leave MH holding two highly prized cable television systems, in Ottawa and Fort Lauderdale, Fla., and CFNY FM radio station in the lucrative Toronto market. But first, the publishing and broadcasting company—which owns Maclean’s— needs the approval of the federal broadcasting regulatory body. And, during public hearings in Hull, Que., last week, MH officials outlined a number of expensive proposals to persuade the Canadian Radio-televison and Telecommunications Commission that the Selkirk deal is just as good for the Canadian broadcasting industry as analysts say that it is for the company itself.
The CRTC is weighing a number of fundamental issues. Paramount is whether MH was simply reselling, or “flipping,” the broadcasting properties to make a quick profit without adding any new value to the companies through new programming or
capital investment—a practice that -
the CRTC expressly forbids. The commission also has to decide if the transaction will cause unacceptable levels of ownership concentration within the broadcasting industry—or limit
competition in the sector by _
increasing cross-media ownership in Canada.
Because of the sheer size and complexity of the Selkirk purchase, a CRTC decision is not expected for at least three months. Investment analysts, meanwhile, say that a decision against MH could be a blow to the company’s longterm growth prospects. Said Derrick Leach, a communications analyst with Toronto investment firm Deacon Morgan McEwen Easson Ltd.:
“For companies as large as Maclean Hunter, you have to go out and acquire assets.”
Within weeks of agreeing to purchase Selkirk, formerly controlled by publishing rival
Toronto-based Southam Inc., MH had agreed to sell several of Selkirk’s western broadcasting properties to Wíe Western International Communications Ltd. of Vancouver for $217.5million and CHCH TV in Hamilton to The Black-
burn Group Inc. of London, Ont., for $68.5 million. And, last January, MH signed an agreement to sell 11 radio stations in Alberta and British Columbia for $24.5 million. That left
_ MH with the cable TV systems
in Ottawa and Fort Lauderdale, and CFNY FM in Toronto.
But during the hearing, MH president Ronald Osborne and CRTC acting chairman Louis Sherman disagreed over just how profitable the controversial purchase would be. According to a report by chartered accountants Peat Marwick, commissioned by the CRTC, MH would profit by between $14.6 million and $36.6 million on the takeover and resale. But Osborne argued that with interest payments, and a revised estimate of the worth of the Hamilton TV station, MH will actually lose money on the deal. Still, Osborne agreed—with evi-
dent reluctance—to turn a measure of any profits from the purchase of Selkirk back into the broadcast system, instead of retaining them. But he said that would occur only if the amount of money flowing into broadcasting had a ceiling. Added Osborne: “If we’re talking numbers that give us ranges of two or three or four million dollars, yes, we could live with it.” As well, Osborne outlined other concessions that MH was willing to make in return for the CRTC’s approval. He told the commission that MH, whose broadcast interests include television station CFCN in Calgary, would spend $19.9 million over five years in donations to
finance new TV drama productions. And when CRTC commissioner Rosalie Gower asked him about the potential for increased cross-ownership of media as a result of the Selkirk transaction, Osborne said that MH would extend a socalled “standstill agreement” between MH and its 62-per-cent-owned subsidiary, the Toronto Sun Publishing Corp., signed in 1981. The agreement guarantees that the “business and affairs” of the Sun corporation, which publishes daily newspapers in Toronto, Ottawa, Calgary and Edmonton, and which also owns 60 per cent of The Financial Post, will be managed by a 12-person board of directors, to which MH can appoint only two nominees.
Despite the MH proposals, the Consumer’s Association of Canada strongly criticized the takeover. Said Tim Creery, spokesman for the advocacy group: “For the commission to go forward with a hearing of this importance without clear policy and guidelines on concentration is a dereliction of public duty.” In the coming months, the CRTC will have to decide between two starkly opposing views.
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