2012 Year in Review: Biggest deal gone bust

It was the deal that never was: BCE's $3.38 billion takeover offer for Astral was shot down by the CRTC.

In a country dominated by the likes of RIM, Magna, Maple Leaf Sports and Entertainment and SNC-Lavalin, it can be tricky to set a new standard for bungled actions and blown calls, but in their botched handling of their proposed merger, BCE sure swung for the fences. Their $3.38-billion deal for Astral Media was summarily spiked and the two sides were sent scrambling, a setback that could sideline their efforts by as much as a year, if not forever.

The basics of the deal are well known: Astral CEO Ian Greenberg looked around this year and realized

his company’s days were numbered. For nearly half a century, the Montreal-based business had been a formidable player in the Canadian media landscape, but with competitors ramping up on all sides, and no

immediate successor among the family willing to take over, Greenberg reluctantly picked up the phone.

The number of people he could call, however, was dispiritedly limited. The only possible bidders would be media player big enough to write a $3-billion cheque, though not so big that the combined

company would make up more than 35 per cent of the market; that’s the CRTC's threshold for scrutinizing any media deal. Forty-five per cent of market share would mean the CRTC automatically pulls the plug.

Greenberg called BCE's CEO George Cope, and rightly or wrongly, that’s when everything went south. Bell offered $3.38 billion for Astral’s 85 radio stations and 20 specialty TV channels, both of which would provide Bell with a much greater presence in Quebec, the better to compete against Quebecor and Cogeco. The deal would also push Bell exceedingly close to the CRTC’s market share limits, with 33.1 per cent in Quebec and 42.7 per cent in English Canada.

However, during the hearings that didn’t appear to be a concern for Cope, who clearly figured that as long as BCE was under the 45 per cent threshold in either market, all was golden. Indeed, the company didn’t even bother responding to the cross-country “Say No to Bell” PR campaign underwritten by Quebecor and Cogeco. The initiative resulted in 70,000 signatures to an online petition opposing the deal. The campaign called for the CRTC to reject the bid on the grounds that it would concentrate too much media control in the hands of one company.

In an interview with the Globe and Mail, Bell Media president Kevin Crull explained why they weren’t bothering to fight back, saying “I don’t think they’ve won over public opinion whatsoever.” Maybe not, but CRTC commissioner Jean-Pierre Blais killed the deal. In addition to the market share matter, the nine thick binders full of submissions opposing the merger, Blais very pointedly referenced during the hearings, may have been the nail in the coffin. Or the fact that Cope appeared so convinced the process was a slam dunk that he wasted little time outlining any of the benefits to Canadians, which after all, was the primary purpose of the hearings.

If Cope had too little appreciation of the hearings while they were happening, he had even less once Blais made his ruling. In a news release issued immediately after the announcement, the company said the decision “reflects a bygone era” and that it was “shocked” by the news.

Perhaps sensing that didn’t quite capture his feelings, the next morning Cope added that some of the CRTC’s reasoning was “absurd” and that his team was both “dumbfounded” and “outraged”.

Those were Cope’s public sentiments. Uncaptured was his private conversation with Blais moments before the verdict was announced. No doubt the CRTC chief got an ear full.

And there it may have died, with BCE thoroughly bungling the process, and if not entirely proving its arrogance during the hearing, certainly driving it home in the immediate aftermath. For a company supposedly trying to show it could be trusted with an outsized stake of the market, it was a shambles of a sales pitch.

But if stomping off in a fury was an option for Cope, it wasn’t for Greenberg, who still had no heir, lots of competitors and now one less suitor in a market with precious few to start. He had no choice except to pick up the phone again and cajole everyone to come back to the table.

That’s where they are now, and though the specifics of the new proposal remain confidential for the time being, they unquestionably involve BCE reaching much more deeply into its pockets, particularly around the funding of Canadian content, while also being far more willing to shed key assets to stay under the CRTC cap.

There’s no guarantee Blais will give the green light, though one thing is ensured: This will take far longer and cost considerably more than planned.

 

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