CanWest shareholders approve NetStar deal

Pact still requires Disney, Canadian approval

TORONTO -- An offer by CanWest Global to purchase specialty channel owner NetStar Communications has been accepted by 68% of shareholders, CanWest announced Wednesday.

Valued at about $875 million, the deal comprises the shareholders' equity of NetStar ($545 million) plus its debt of $330 million. NetStar is a private company whose holdings include the enormously successful Canadian specialty channels Discovery and the Sports Network.

Although the agreement is a long-awaited victory for CanWest, there are still a couple of important hurdles to clear. The deal is subject to pre-emptive rights by Disney subsidiary ESPN, which holds the remaining 32% of NetStar.

ESPN can either tender its shares or, within 15 days, give notice that it intends to seek another buyer. Then ESPN would have another 90 days to produce a buyer offering the same price and the same conditions as CanWest. CanWest has negotiated a $15 million "break fee" if this happens, payable by the shareholders.

The agreement is also subject to approval by Canada's broadcast regulator, until which time CanWest must put the shares into a trust.

Up for grabs

NetStar has been on the block for almost 18 months, and this deal has been in the offing for some time. Negotiations stalled last fall when CanWest took issue with the broad veto powers that ESPN wanted over NetStar's budget, personnel, program supply and purchases.

"The NetStar acquisition gives us controlling interest in the top-rated cable networks in the country," said CanWest's chief operating officer Israel Asper in a written statement, "which, combined last year, captured more than 35% of the total advertising spent on all cable networks in 1998 and more than 50% of the operating profit."

NetStar chairman, founder and CEO Gordon Craig called the deal "a dynamic new partnership which is strategically positioned for growth in the Canadian broadcasting industry."