Thomson, BCE form major media meld

Communications merger to be worth $2.72 bil

TORONTO — Business information empire Thomson Corp. and multimedia behemoth BCE announced Friday that they have inked a deal to pool their resources to create a television, newspaper and Internet powerhouse worth C$4 billion ($2.72 billion).

Deal will see the formation of a multimedia company that includes the CTV television network (which BCE took over earlier this year, pending regulatory approval), national newspaper the Globe & Mail, Internet content provider Globe Interactive and web portal Sympatico.

In exchange for 70.1% of the new company, BCE will kick in CTV (which has 18 wholly owned TV stations and all or part of 13 specialty channels, including those of specialty powerhouse NetStar Communications), as well as its controlling interest in Sympatico-Lycos and its interest in Extend Media. Thomson will take a 20% stake and contribute the Globe & Mail, Globe Interactive and its 50% interest in specialty business news web ROBTV.

The Woodbridge Co. (the Thomson family holding company) has paid $262 million in cash for a 9.9% interest in the new company, which will employ 4,000 people. Projected revenues for 2001 are $2.1 billion.

“This partnership strengthens BCE’s content strategy by creating an unparalleled group of leading print, broadcast and Internet brands at a crucial time in the evolution and convergence of media, communications and entertainment,” said BCE chairman and CEO Jean Monty in a statement.

Rumors had included the hockey and basketball franchises the Toronto Maple Leafs and the Toronto Raptors, but they were not part of the deal announced Friday. “It’s something that could be looked at later,” Monty said.

Some analysts are skeptical about the compatibility of the cultures and businesses of BCE and Thomson. “There are so many disparate assets, so many web sites and specialty channels to swallow,” said media analyst David Ellis of Omnia Communications in Toronto, “that I have serious reservations about whether they can pull something off, and what that something is going to be.”

The BCE/Thomson deal is the third Canuck mega-deal to be announced in as many weeks. Cabler Videotron agreed to be taken over by Quebec media giant Quebecor and the pension group La Caisse de Depot et Placement for $3.33 billion last week. And in late August, CanWest Global signed a deal with Conrad Black’s Hollinger newspaper chain under which CanWest is buying Black’s Canuck print and Internet assets to create a $2.29 billion entity.

Ellis calls the flurry of takeovers and partnerships “bandwagon” behavior. “There’s a feeling that if we don’t buy a TV network this week, someone will buy it next week, and then we won’t be able to,” he said. “But tonnage is not the whole story in new media the way that it is in ad-supported network TV.”

Ellis believes BCE/Thomson has an advantage over CanWest/Hollinger: As the largest Internet service provider in Canada through Sympatico, BCE has digital pathways into the homes of hundreds of thousands of Canadians. In addition, BCE owns the largest Canuck DTH satellite service, Bell Expressvu. CanWest/Hollinger has neither.

“At least BCE has got that much of a start into homes, whereas CanWest has a bunch of TV stations and a bunch of newspapers,” said Ellis, “so there’s no digital pathway there.”

And while the new Quebecor/Videotron entity will have a stranglehold on the Quebec market, it is limited both by language and geographical barriers.

The three deals are “difficult to compare,” Ellis said, in that CanWest/Hollinger and BCE/Thomson are content acquisitions, and the Videotron transaction is “a connectivity play,” but in his opinion, none has yet come up with a winning formula.

Ivan Fecan, current president and CEO of CTV will be CEO and Monty will be chairman of the board of the new, as-yet-unnamed company, which will be headquartered in Toronto. Ken Thomson, who controls 73% of the Thomson Corp., will become chairman of the Globe & Mail.

Deal, subject to the approval of the Canadian Radio-Television and Telecommunications Commission and the Competition Bureau, is expected to close in the first quarter of 2001.

Public hearings for BCE’s purchase of CTV are to begin today. Ellis foresees some awkward questions for CTV and BCE at the hearing: “If I was on the panel as a commissioner, I would be a little frustrated by having to sift though all this barrage of information that’s come through today. This muddies the waters for everyone.”

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