RADIO

CRTC officials grill Astral over Standard Broadcasting price
Suggest deal worth more than $1.08-billion


GRANT ROBERTSON
globeandmail.com
August 28, 2007

GATINEAU, QUE. -- Astral Media Inc. faced tough questions yesterday from federal broadcast regulators who suggested the broadcaster is low-balling the $1.08-billion purchase price of Standard Broadcasting Ltd. - a deal that will create the largest commercial radio company Canada has ever seen.

At hearings held yesterday to scrutinize the massive takeover, officials with the Canadian Radio-television and Telecommunications Commission indicated they believe the Standard transaction is worth more than Montreal-based Astral is letting on, and that certain items have been left out of the purchase price to keep a lid on regulatory payments.

Astral executives were questioned about the stock price used to value more than two million shares changing hands in the deal, which the CRTC argues is being understated.

The company was also asked to explain why the compensation being paid to Standard chief executive officer and owner Gary Slaight, who will sit on Astral's board, was not included in the deal's value since the payments are "a financial advantage to him."

In an unusual step, CRTC commissioner Andrée Noël asked what the company would think if the regulator stepped in and required the transaction to be recalculated.

"I think you would be setting a very dangerous precedent," Jacques Parisien replied.

Mr. Parisen is president of Astral's radio division.

The move, the latest indicator of the CRTC's increased willingness to wade into broadcasting deals in the wake of three billion-dollar takeovers that have been executed in the past year, caught Astral executives off guard.

The cash-and-stock deal, announced in February, was expected to face few regulatory hurdles. The two companies' assets have no overlap, so they don't run afoul of CRTC rules limiting broadcasters to a maximum of two FM and two AM stations in a given market.

Ms. Noël asked Astral why the company used a lower average share price to calculate the value of its stock in the deal - using the week the transaction closed rather than the week the deal was announced, when the shares were trading higher.

Mr. Parisien said Astral was following generally accepted accounting principles in Canada, and that if the CRTC were to also step in and also require the board compensation of Mr. Slaight to be included, it would violate those practices.

The disagreement doesn't affect what Astral is paying for Toronto-based Standard, but does influence how much Astral will have to contribute in regulatory payments. Whenever radio assets are sold, the purchaser must pay 6 per cent of the deal's price into various funds that help produce Canadian talent, news and music.

The CRTC figures roughly $200,000 should be added to the value of the deal, to boost those payments, an amount that left Astral executives perplexed since it is so small. However, the company isn't anxious to change the way the deal is structured, one executive said afterward, worried that it would set a precedent for other deals.

Astral proposes to pay $63.2-million in benefits to the industry. It would be the biggest of such regulatory payments ever made in the industry.

The deal will turn Astral into Canada's biggest radio company, with 81 stations, including 60 FM stations. Executives testified they believe the deal will not disrupt the competitive landscape of the market, because the radio stations don't overlap.

"Each Astral station has a distinct voice that reflects its community. Each Standard station is equally as distinctive, the acquisition will not change any of that," Mr. Parisien testified.

But the CRTC showed concerns, asking Astral about whether its increased size will drown out local programming.

CRTC commissioners asked whether Astral intends to use a "networking" strategy now employed in Quebec throughout the rest of Canada. Under that strategy, the company broadcasts key daily programming - such as an afternoon drive-home show made in one Quebec market - across several cities to save money.

Executives said networking works in Quebec, where radio markets are more closely linked by culture and geography. But the company is unlikely to try it across Canada, where time zones and vastly different communities make such an approach difficult.

Although Standard uses some syndicated programs - such as weekend countdown shows - on its stations, which include The Mix in Toronto and CJAY in Calgary, Mr. Slaight said opportunities are more limited in English Canada. "Most of the local markets are so different - Hamilton is different from St. Catharines - so we don't do a lot of networking."

In cases in which a broadcasting takeover results in a company controlling too many radio or TV assets in one market, the regulator can step in to order further asset sales.

Most recently, when the CRTC reviewed the $1.4-billion takeover of Toronto-based CHUM Ltd. earlier this year by CTVglobemedia Inc. (parent of The Globe and Mail), it determined the broadcaster would hold too many TV stations in several markets, including Vancouver and Toronto.

The regulator required Toronto-based CTVglobemedia to sell off CHUM's five CITY-TV stations, which were later acquired by Rogers Communications Inc., also of Toronto.

Standard is Canada's largest privately held radio company. If the deal is approved, the combined Astral and Standard operations will represent 19 per cent of the radio listening hours in Canada, slightly ahead of Toronto-based Corus Entertainment Inc., which would be second, with 17 per cent, Mr. Parisien said.

Based on market share, Astral and Standard will hold 22 per cent of radio advertising; and Rogers 18 per cent, according to CRTC data, he said.

http://www.theglobeandmail.com/servlet/story/LAC.20070828.RASTRAL28/TPStory/?query=Grant+Robertson

Is it me or is the CRTC taking a tougher stand on issue these days. They kicked CTV's but over the CITY TV stations and now raking Astral over the coals. Wouldn't that be something if the CRTC became relavant!

the crtc just is making it look like they gave their decision much thought.

reallity is they prob already made up their mind before the hearing....

I think the CRTC is trying to flex their muscle, this week they even delayed the CanWest  Alliance decision until November or later. It was expected in September.