CHUM/Craig first in predicted consolidation

$200 mil deal gives broadcaster toehold in Alberta

TORONTO CHUM solidified its position as Canada’s third-largest private broadcaster last week when it inked a deal to acquire Craig Media.

The $200 million deal is of both financial and strategic importance to CHUM because it gives the company a presence in the coveted Alberta market.

A public company controlled by the Waters family, Toronto-based CHUM follows private broadcasters CTV and CanWest Global in size.

CHUM has 30 radio stations, 18 specialty TV channels and eight local TV stations in Toronto, Ottawa, Ontario Vancouver and Victoria.

“It’s important to be larger,” CHUM prexy and CEO Jay Switzer tells Variety. “Conventional television is a tough business. It takes scale and deep pockets.”

In February, Canada’s broadcast regulators denied CHUM a license to operate in Alberta, citing concerns that CHUM’s entry into the market there would negatively impact the incumbent, Craig Media.

The takeover has been widely expected since that time.

Craig and CHUM used to be friends. With CHUM limited to the Toronto area and Craig out west, the two shared a symbiotic programming relationship. Then both moved into an expansion strategy and things started to get nasty.

CHUM won a hotly contested battle for the British Columbia market by launching and taking over stations in Vancouver and Victoria.

Craig trod on CHUM’s toes in 2001 when it teamed up with Viacom to launch MTV Canada and MTV2 as well as TV Land. CHUM owns and operates specialty channels MuchMusic and MuchMoreMusic and has long fought to keep MTV out of Canada.

Then Craig won a broadcasting license in the Toronto market — CHUM’s home turf. This outlet, Toronto 1, helped bring Craig down.

The company needed money to finance the launch, and instead of going public, it sold a 19.9% interest in Craig to Providence Equity for $82 million. Toronto 1, which launched in September, has failed to live up to expectations both critically and financially, and Craig is having difficulty keeping up with its financial obligations to Providence Equity. It put itself on the block in January.

Switzer refers to Craig’s operational situation right now as “urgent,” and says it will be able to offer Craig some immediate cost-savings by supplying its western Canadian channels with programming to which CHUM already owns national rights.

The deal has to be greenlit by the Canadian Radio-television and Telecommunications Commission.

CHUM already owns two local channels in the Toronto area, Citytv and theNew VR Barrie. Regulators are expected to balk at CHUM owning a third outlet in the Toronto area, and so CHUM committed to selling Toronto 1 when it announced the deal.

Potential bidders for the channel, which will likely go for around $37 million, include Torstar, Quebecor, Corus and Alliance Atlantis. Torstar is the only one to have publicly expressed interest.

If the transaction is approved, it will give CHUM a local TV presence in five of the six major markets in Canada, with just Montreal missing from the list.

“Our big savings are not with staff,” Switzer says, “but with programming, because we own national rights to all the programs that we license and we produce, and we can use them with no extra cost to us.”

Industryites are predicting that the CHUM/Craig deal could be the first wave of a renewed consolidation push for the industry.

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