The best-read book on Bay Street this week just might be the binder that bankers are handing out to potential investors in CanWest Global Communications Corp.
More than 90 groups - from private equity funds to rivals - have expressed interest in combing through CanWest's books as the company and its financial advisers at RBC Dominion Securities Inc. seek up to $65-million in new funding.
Of those, about 20 parties have gone a step further, signing the stringent non-disclosure agreement needed to actually look under the hood at CanWest's television properties to see if the company's flagship operation, Global Television, is worth investing in. They include the Jim Pattison Group of Vancouver and former Alliance Atlantis Communications Inc. executive chairman Michael MacMillan.
The roster also includes about a dozen private investment firms, including several names CanWest officials have never heard of nor met with in the past year as the company sought a financial lifeline.
The search for an outside white knight, who must be Canadian to satisfy federal ownership laws, is part of a restructuring plan that is expected to conclude by the end of January, with CanWest creditors swapping their debt for equity in the company.
CanWest filed for court protection from creditors in October for CanWest Media Inc. The division owns Global TV and a few specialty channels, but does not include the company's newspaper division, which owns newspapers in most major cities across the country, such as the Vancouver Sun and Ottawa Citizen.
RBC Dominion opened what's known as a data room two weeks ago, offering up documents that detail CanWest's financial position and strategic secrets, such as its contracts on Hollywood TV programs.
As well, several of CanWest's competitors are using the process as an opportunity to scrutinize the company's operations, including rival network CTV, which would be precluded from any investment in CanWest due to media ownership rules.
Corus Entertainment Inc. and Astral Media, two broadcasters interested in acquiring CanWest's specialty channels, are not on the list, but are believed to be using banks to represent them in the process. However, those companies have said they are not interested in buying Global TV.
Other players, including newspaper owners Glacier Ventures and FP Newspapers Income Fund, have taken a look; however, it's believed they are hoping to get a partial glimpse of CanWest's newspaper operations through viewing the numbers at the television business.
The most interested parties so far are the investment funds, rather than the media players. One source said CanWest can track how engaged each potential investor is by looking at the number of times documents are downloaded using the online process. A company spokesman, however, would not comment on the process or which parties were involved.
Despite the outside interest shown to date, sources say CanWest might find the extra money it needs from existing creditors. Distressed debt funds that currently own CanWest bonds can dictate the terms of any deal, and have already shown they can earn handsome returns from providing the company with capital.
However, most of those funds are foreign players that would still need to have a Canadian officially in control of the company.
"This is a complicated transaction, and it's too small to attract some of the financial sponsors you would typically expect, such as the big pension funds, so the list of who can actually take on CanWest likely boils down to three or four players," said one lawyer working on the restructuring.
That list of potential investors includes Onex Corp. and Fairfax Financial Holdings Ltd. But sources close to both companies say while they have looked at CanWest, they are not interested.
Any potential investor faces the prospect of rebuilding a frayed partnership with Goldman Sachs & Co., which co-owns 13 specialty television networks with CanWest, including Showcase and HGTV. Goldman has taken CanWest to court to enforce its hold on the specialty television unit, which is profitable and is not included in the court filing.
CanWest chief executive officer Leonard Asper, part of the family that controls the voting shares, offered to contribute up to $15-million to the $65-million rescue effort.
As things stand, the filing for creditor protection all but wiped out the Asper family and the rest of CanWest's shareholders. All CanWest shareholders stand to own just 2.3 per cent of the company under the planned terms of the rescue, and the Asper family's stake would amount to just over 1 per cent.
However, the Aspers are trying to acquire a larger stake in the company under a proposal that would see them stay on as operators. Under regulatory rules in Canada, if a TV operation changes owners, the CRTC requires a payment worth 10 per cent of the transaction to be put into the Canadian production industry. That could trigger a payment by the company estimated at between $35-million and $55-million.
The Aspers have proposed in any restructuring that they stay in control of the company, avoiding such a payment. In exchange, they would also be given more equity in the company.
Grant Robertson
Andrew Willis