Will Izzy Asper fight Shaw and Allard for control?
The future of WIC
Will Izzy Asper fight Shaw and Allard for control?
It had been clear for some time that Emily Griffiths wanted to make changes in her life. Last spring, the silver-haired, 75-year-old grande dame of Vancouver’s Griffiths clan resigned from the board of WIC Western International Communications Ltd., the television and radio company her husband, Frank, had built before his death in 1994. Then, she began to take other steps, disconnecting her listed phone number, preparing to move into a new $4-million home, buying herself a $1.5-million yacht, Obsession, and planning to take it on an Alaska cruise this summer. But Emily’s most dramatic move came at 7:28 on the morning of March 14. In a sparely worded news release, Frank Griffiths’s widow announced that she was selling her shares in WIC to two wealthy Alberta families, the Allards of Edmonton and the Shaws of Calgary. Her price: $91 million.
Rumors that Emily Griffiths wanted to sell her stake in WIC have been rife since Christmas. But most analysts expected the television and radio conglomerate to go to CanWest Global Communications Corp. of Winnipeg. Can West’s chairman, I. H. (Izzy) Asper, has made no secret of his desire to extend his chain of television stations nationwide. Taking over WIC’s four Alberta outlets, including two in Edmonton and Calgary, would be a giant step towards that goal. Asper, moreover, has positioned CanWest for just such a move, building up its holdings in the Vancouver broadcaster. Three years ago, he even attempted to execute a hostile takeover of WIC, offering $656 million
for the company. But when Griffiths decided to sell—for a fraction of that figure—she did so in a finely calculated transaction that left voting stock in WIC almost evenly split between the Allards (through family-owned Cathton Holdings Ltd.) and the Shaws—whose Shaw Communications Inc. already has extensive media assets.
Griffiths could do that because of WIC’s two-tier share structure. Her class A stock consisted of voting shares (before the sale, she owned 61 per cent of those outstanding). The B-class stock that Asper’s CanWest has been accumulating entitles its holders to dividends—but not to voting rights. The structure is not uncommon: family companies (including Shaw) often favor the technique as a way to bring investment into a firm, without losing control over its management. But it has also been controversial, since even large investors in B stock—such as Asper—find they lack a voice in their corporation’s affairs. And critics insisted that Griffiths’s carefully structured sale shortchanged holders of WIC’s B stock. “Minority shareholders have been abused,” fumes Bill Riedl of Fairvest Securities Corp., a shareholders advocacy group.
WIC’s sale is far from a done deal. For one thing, it is certain to be intensely scrutinized by the Canadian Radio-television and Telecommunications Commission, which must approve the transfer of ownership of broadcasting outlets. The WIC sale may also attract the attention of both stock market regulators and the courts, if Asper challenges the sale or critics like Riedl get their way.
At the heart of the disputes over WIC’s future lies a provision in the Companys shareholder agreement known as a “coat-tail clause.” The clause is supposed to be triggered once the majority stake in WIC’s voting A shares is transferred, when it would effectively turn all WIC non-voting B shares into voting ones. Griffiths’s sale attempts to step around the clause by giving 49.9 per cent of WIC’s voting shares to the Allards, and 49.96 per cent to the Shaws. That, argues Jim Shaw, president and chief operating officer of Shaw Communications, means WIC “has been sold from a control position to a noncontrol position, because no one shareholder can control it.” And, since no single owner is in control, Shaw insists, the coattail clause did not kick in.
That logic makes shareholder advocate Riedl sputter with anger. “It’s absolutely ridiculous to say that and think somebody is going to believe it,” Riedl asserts. “One family does not clearly have control relative to the other family, but jointly they both have control.” Riedl hopes security regulators will launch an investigation—as they did I in 1987 when the Billes family tried to sell its shares in Canadian Tire § Ltd. to the chain’s store dealers without provision to compensate S nonvoting shareholders. Regulators responded by requiring compa§ nies with two classes of capitalization to adopt coattail clauses, to en§ sure that minority shareholders are treated fairly.
8 Last week, other minority shareholders waited to see how Can| West would respond to being shut out of the new controlling partS nership. “Izzy Asper,” says one observer, “is in the most powerful
seat now.” One option: go to court and claim that the coattail provision should kick in, a move that might force the Allards and Shaws into an out-of-court settlement. But Asper has tried to twitch WIC’s coattail into action before. When his 1995 takeover bid (which included both classes of WIC shares) failed. Asper went to the B.C. Supreme Court. He argued that the Griffiths sale of a block of A stock to the Allards had triggered the clause. The judge disagreed. A simpler alternative for Can West now would be to swap its 30-per-cent stake for some of WIC’s broadcasting assets.
In the wake of the sale, several analysts speculated that Asper’s litigious bent—and Can West’s continuing efforts to buy up WIC shares—had left Emily Griffiths opposed to selling out to the Winnipeg-based family. But one executive familiar with WIC says that is not necessarily the case. “I don’t think the Griffiths cared who they sold to,” the insider noted. “It was probably just a matter of getting the best deal.” In any case, the Allards had first right of refusal for any sale of Griffiths-owned shares. And if the Griffiths had experienced
problems with the Aspers, so had the Allards. In the late 1980s, family patriarch Dr. Charles Allard tussled with Izzy Asper in court over ownership of Vancouver’s CKVU-TV. That time, Asper won, and CKVU is now the city’s local Global station.
But the Aspers are not yet out of the latest fight for WIC. When Griffiths made her late-night announcement. Asper was vacationing at his condominium in West Palm Beach, Fla. Sons David and Leonard, both executives with Can West, had just returned from a business trip to Ireland. When Izzy Asper heard about the Griffiths sale, he flew home. Through news releases, the family claimed it had talked with Griffiths about buying WIC, but discussions stopped “when negotiations reached an impasse over nonmonetary issues.” Late in the week, Asper and Can West’s top executives retreated to an undisclosed U.S. location to plan their response. Said Asper: “CanWest has no immediate plans to take any action until complete information is available.” Shaw began moving into action last spring, when it started buying WIC shares. “We believed,” said its president, “something was going to happen in the long run.” Like WIC, Shaw owns or has shares in radio stations, satellite TV services and a number of specialty TV stations. It is also in the cable television business. Jim Shaw insists there are “synergies” between WIC and Shaw assets.
But those mutual benefits may look like something else to the CRTC. The commission has already forced Shaw to delay the planned purchase of Sportscope Network Ltd., a specialty cable channel, while it considers critics’ concerns that the acquisition opens the door to Shaw favoring Sportscope on its cable system. In the WIC case, the CRTC will be concerned that integrating WIC’s assets with Shaw’s could also lessen competition. “Their decision could be conditional on selling some of the assets,” Jim Shaw acknowledges. “We could divest some WIC assets or sell some of our a. own.” (The same fate would almost cerg tainly await Can West, should it ever I emerge as WIC’s proprietor.) k Most investment analysts and media £ buyers, meanwhile, greeted the WIC S sale as a good thing. Said Vince Valen1 fini, Toronto-based media analyst with ¿ Lévesque Beaubien Geoffrion Inc.: I “When the Griffithses held the voting 1/5 shares, things were static. For two years, people were speculating that WIC would be broken up. Now, some restructuring can begin.”
But Frank Griffiths’s biographer, Reginald Roy, believes WIC’s founder would be saddened by what has happened to the company he built. “I think he was well aware,” Roy says, “that his sons wouldn’t be able to run it as he did.” So, it seems, was his widow. It was Emily Griffiths who agreed that their eldest son, Frank Jr., should be removed as WIC’s senior vice-president in 1995. Younger son Arthur took over the family’s sports empire, Northwest Sports & Entertainment, and ended up losing it to Seattle businessman John McCaw.
Testaments to the Griffithses accomplishments remain: the Vancouver Canucks hockey team, the Vancouver Grizzlies basketball team, General Motors Place (where the two teams play), the influential BCTV television station and powerhouse CKNW radio. Then there is Griffiths Way, a little blink of a street that runs alongside GM Place. As Emily Griffiths readies herself for her getaway cruise to Alaska, she could take comfort in the knowledge that her husband’s acumen will not soon be forgotten. But whoever emerges at the helm of WIC, control of the family’s former empire has finally slipped not only out of its hands, but out of British Columbia. □
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