Chum sold for major Canadian bacon

Pair team up to take on rival

By BRENDAN KELLY

MONTREAL -- In a radical realignment of the Canuck TV biz, Bell Globemedia -- which owns the leading CTV network and a slew of specialty channels -- has inked a deal with Toronto-based Chum to take over the rival broadcaster.

The C$1.7 billion ($1.5 billion) acquisition will give Bell Globemedia, majority-owned by Montreal-based telecom company BCE, control of two of Canada's three major networks. The only other national net is the CanWest-owned Global Network.

Deal will have a huge impact on program buying for the Canadians in Hollywood, as there will be only two major buyers coming to the L.A. Screenings.

At the same time, Chum announced a reorganization of its TV news operations across the country, with many local newscasts cancelled and 185 staffers fired. The one-time severance cost of the layoffs is estimated at $6.1 million; the net annual savings are projected to be about $13.3 million.

Chum owns 12 local television stations across Canada, including flagship Citytv outlets in Toronto and Vancouver, and 21 specialty webs, including MuchMusic, sci-fi channel Space and arts net Bravo. Chum also owns 33 radio stations in Canada.

CTV operates 21 conventional television stations across Canada and has interests in 17 specialty channels, including leading sports outlets TSN and RDS.

Federal broadcast regulator the Canadian Radio-Television and Telecommunications Commission must approve the deal and may force Bell Globemedia to sell off some of the Chum TV stations.

The estate of Chum founder Allan Waters and other related entities, which together are controlling shareholders, have entered into a lock-up agreement with Bell Globemedia that ensures they will deposit all of their shares toward the offer.

Chum initiated the sales process via investment company Blair Franklin Capital Partners, which approached Bell Globemedia.

Canada's main actors union, ACTRA, reacted with dismay to news of the media merger.

"We're seriously concerned about the impact this excessive media concentration will have on diversity, competition and choice," said ACTRA national executive director Stephen Waddell. "Canadian viewing habits are already limited by the swath of duplicated U.S. product carried by private TV broadcasters. This merger will leave us with even fewer voices and less options for seeing our own distinctive stories."

In a conference call with investment analysts, Chum CEO Jay Switzer was coy about his future.

"I'm here, and we're excited about the work we're doing," Switzer said. "There's a lot of work to do, and I'm here through the transition. There's been no discussions about what might happen (to me) a year from now."

Under the takeover agreement, Chum and its controlling shareholders are allowed to accept a superior proposal if Bell Globemedia fails to match that offer after three business days. If Chum accepts a better offer, it has to pay Bell Globemedia a fee of $37 million.

"In Bell Globemedia's offer, we not only found value for shareholders but confidence that we would be placing Chum in the hands of an owner with the financial resources and track record to continue to grow and build on our collective legacy," Chum chairman Jim Waters said.

"Bell Globemedia is clearly the most logical buyer of Chum," Bell Globemedia CEO Ivan Fecan said. "There is a unique strategic fit to our operations."

Fecan said the company will maintain separate CTV and Citytv stations and keep separate, independent news divisions for the two nets to ensure continued diversity in news programming in Canada.

Also Wednesday, Chum reported its net profit in the third quarter dipped to $20.3 million, compared with $21 million in the same quarter last year, on increased expenses.