TORONTO (CP) _ CanWest Global Communications Corp. (TSX:CGS) is increasing its equity investment in the takeover of Alliance Atlantis Communications Inc. (TSX:AAC.B) to $262 million, up from the previously announced $200 million.
CanWest and Goldman Sachs said Tuesday they have completed details of their joint-venture agreement announced in January, and CanWest will hold a 36 per cent equity stake but two-thirds of the voting shares in the Alliance Atlantis specialty-channel assets.
The New York investment bank will have the other one-third of the voting shares and 64 per cent of the equity in the broadcasting joint venture.
As previously announced, CanWest will have no stake in the Alliance Atlantis entertainment and movie distribution businesses after the $53-per-share takeover. Goldman Sachs will take the Alliance Atlantis stake in the "CSI" TV crime-series franchise, and the Toronto company’s 51 per cent of Motion Picture Distribution LP is to be controlled by a Canadian partner of Goldman Sachs.
Tuesday’s announcement came a day after CanWest and Goldman, amid increasing turmoil in the corporate debt market, gave up on selling high-interest notes to support the $2.3-billion takeover and said a bank syndicate will provide financing.
The closing of the deal was postponed by eight days to Aug. 15 to finalize bank commitments.
The portion of the $2.3-billion overall price being allocated to the Alliance Atlantis broadcasting business is $1.5 billion. While CanWest contributes $262 million and Goldman Sachs puts up $472 million, their CW Investments Co. joint venture will take on $788 million in debt.
This will consist of a $475-million term loan and $313 million of bridge loans. There also will be a $50-million revolving credit facility which is not expected be immediately drawn upon.
These debt financings will be independent of CanWest and Goldman Sachs, with recourse only to CW Investments.
CanWest has undertaken to merge its Canadian television business, including the Global TV network, with the CW Investments group in 2011. The Winnipeg-based media conglomerate’s equity interest in the combined enterprise will be based on the profit performance and debt level of the businesses during the year ending March 31, 2011 _ not Dec. 31, 2010, as previously disclosed.
Assuming that the CW Investments debt on March 31, 2011, was still $788 million, CanWest’s equity interest would be 50 per cent if total earnings before interest, taxes, depreciation and amortization were $200 million in the year ending March 31, 2011.
CanWest’s stake would rise _ or fall _ by about five percentage points for each $50 million in combined EBITDA (earnings before interest, taxes, depreciation and amortization) above or below $200 million. It also would rise if debt were reduced or fall if debt increased.
CanWest and Goldman Sachs "have also agreed to certain put rights and call rights with respect to Goldman Sachs’ equity interests in CW Investments," the companies said.
If CanWest or CW Investments have not acquired all of the Goldman Sachs equity interest by the expiry of Goldman’s last put right in 2013, "then Goldman Sachs will be entitled to sell the CW Investments group, subject to a right of first offer in favour of CanWest, failing which Goldman Sachs will have the right to require CW Investments to effect an initial public offering."