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Decision
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Ottawa, 13 October 1987
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Decision CRTC 87-837
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Eastern Ontario Broadcasting Company Limited
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Brockville, Ontario - 871053500 - 871054300
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Following a Public Hearing in the National Capital Region on 9 July 1987, the Commission approves the applications by Eastern Ontario Broadcasting Company Limited (Eastern), licensee of CFJR and CHXL-FM Brockville, for authority to transfer the effective control of the licensee through the transfer of 4,000 common shares (100%) from the current shareholders to St. Lawrence Broadcasting Company Limited (St. Lawrence).
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Eastern, which was incorporated in 1943, is an established broadcasting company in the Brockville market, and has been held by the Radford family since November 1946. It is effectively controlled by John A. Radford, indirectly through Jedcom Investments Ltd. (72.5%). The remaining shares are held by Armadale Communications Ltd. (27.5%), an unrelated company.
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Following a Public Hearing in the National Capital Region on 1 December 1986, the Commission had approved an application by Eastern for a new FM station in Brockville, and denied a competing application by St. Lawrence, the proposed purchaser in the present application (Decision CRTC 87-136 dated 20 February 1987). In that decision the Commission had concluded that theoperation of a new FM service on a joint basis with the established station offers the best chance of success with the least economic impact on CFJR.
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At the 9 July public hearing, Mr. Radford, President of Eastern, indicated that he had decided to sell the company because of difficulties of a personal nature which have arisen since the December hearing, noting that he would have enjoyed meeting the challenges of resolving the AM station's current operational problems and of putting the FM station on the air in different personal circumstances.
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In response to the Commission's concern over the proposed rapid change of control of a licensed undertaking, the licensee submitted an affidavit which outlined the series of events leading up to the transfer agreement. Mr. Radford stated that St. Lawrence, having heard through secondary sources that Eastern wanted to sell its AM station, approached Eastern in January 1987 indicating its interest in purchasing the company.
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As further evidenced in the affidavit, on 29 January 1987 St. Lawrence accepted the terms and conditions of Eastern's proposed agreement to sell the AM station. One month later, the Commission published its decision approving Eastern's application for the new FM station for Brockville and after subsequent discussions, Eastern and St. Lawrence agreed that, notwithstanding the Commission's decision, the asking price and other terms of the purchase agreement to acquire the AM station would remain unchanged.
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Mr. Radford stated that the financial resources available to St. Lawrence will enable it to resolve the current operational problems of the AM station and enable it to put the new FM station on the air. In addition, Mr. Radford indicated that he intends to remain with the stations on a consultative basis, which would ensure continuity ofoperation without the responsibility of day-to-day involvement.
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St. Lawrence is ultimately owned and effectively controlled, equally, by James A. Waters, Ronald A. Waters and Sheryl V. Bourne, and is the licensee of CKLC and CFLY-FM Kingston. The three principals are also beneficiaries of the Allan F. Waters Family Trust, which holds less than 1% of the shares in CHUM Ltd. (CHUM).
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When questioned at the hearing regarding the extent to which the relationship between CHUM and the principals of St. Lawrence would affect the operation of the Brockville stations, Mr. James Waters, President of St. Lawrence, stated that while the stations would benefit from the option to access CHUM's extensive programming resources, St. Lawrence would continue to function as an autonomous company.
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St. Lawrence proposes to purchase 100X of the outstanding shares of Eastern for $1,025,000 in cash, through a $1,300,000 line of credit. Based on the evidence filed with the application, the Commission has no concerns with respect to the availability or adequacy of the required financing.
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The Proposed Benefits
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As stated in a number of decisions relating to applications for authority to transfer ownership or effective control of licensee companies, and because the Commission does not solicit applications for such transfers, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
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The Commission reaffirms that the first test any applicant must meet is that the proposed transfer of ownership or control yield significant and unequivocal benefits to the communities served by the broadcasting undertaking and to the Canadian broadcasting system as a whole, and that it is in the public interest.
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In particular, the Commission must be satisfied that the benefits, both those that can be quantified in monetary terms and others which may not be easily measurable in terms of their dollar value, are commensurate with the size of the transaction and that they take into account the responsibilities to be assumed, the characteristics and viability of the broadcasting undertakings in question, and the scale of the programming, management, financial and technical resources available to the purchaser.
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In his presentation, Mr. James Waters summarized the benefits to be realized as a result of this transaction: ... the Brockville community will benefit from this sale by the financial strength of our company, our programming expertise, our sales and marketing expertise and our high level of community involvement.
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With respect to benefits that can be quantified in monetary terms, St. Lawrence proposed to continue to honour the present Canadian talent commitments of both the AM and the new FM station, which have a total tangible value of approximately $40,000 annually. It further proposed to continue Eastern's annual support for the Riverfest Festival for which $9,000 was budgeted in 1987. In addition, St. Lawrence made new commitments with respect to both undertakings with a measurable value of $125,000 over the first year and an additional $30,000 for each remaining year of the licence term.
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The proposed benefits identified in the applications and addressed at the public hearing are outlined below.
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Local Orientation
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In order to ensure continuity of local orientation during the transition period, St. Lawrence confirmed that Mr. Radford, although relieved from the day-to-day responsibilities of the stations as a result of this transaction, would make his expertise available and maintain his involvement in the operation of the stations on a consultative basis. In retainingMr. Radford, St. Lawrence emphasized its commitment to continue the provision of a high calibre of local service to the Brockville community.
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Financial Stability
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St. Lawrence underlined the fact that the financial stability that it will provide to CFJR and the new FM station is a significant benefit. This will allow it to make the changes necessary to expand CFJR's existing service to the community and improve upon the commitments proposed by Eastern for the FM station, which the new licensee would hope to put on the air within six months of a favourable decision.
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Mr. Radford substantiated this view, stating that St. Lawrence would make it possible to realize all of the benefits that he had proposed but had so far been unable to carry out due to business and personal obstacles and that, accordingly, this change in ownership is the best thing that could happen to the Brockville community .
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Community Relations
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Citing its record as licensee for the community-minded radio stations CKLC and CFLY-FM Kingston, St. Lawrence proposed that it would hire a community relations representative for the Brockville stations, as it now employs for the Kingston undertakings. This official would be responsible for co-ordinating talent searches and a proposed mobile recording studio, any joint station/community projects and any station co-sponsorship projects with local charities. In addition, the community relations representativewould help to organize and plan fundraisers for non-profit groups, as well as organize listener contests and promotions, and solicit advertisers for the stations.
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St. Lawrence has allotted a budget of $30,000 for the annual capital costs of this initiative, which includes the operating expenses of the " bile unit and the services of the community relations person.
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Promotion of Canadian Talent
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St. Lawrence confirmed, at the hearing, that it would honour the commitments made by Eastern in the important area of Canadian talent promotion, for both the AM and FM undertakings. These commitments include, amongst others, such initiatives as a free advertising plan for the promotion of Canadian artists and recordings, the promotion of a Canadian children's group performing in Prescott's Loyalist Days , sponsorship of the Winter Carnival Musher's Ball , on-air interviews with people involved in theatre and other cultural events in the area and live and live-to-tape broadcasts of performances of groups appearing in the Brockville area. St. Lawrenceprojected an annual budget of approximately $40,000 for these initiatives, in addition to its support for the Riverfest Festival, as previously cited.
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Technical Improvements
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In addition to those commitments noted above, for both undertakings,
St. Lawrence proposed to acquire a computer system to control traffic and music. As submitted by St. Lawrence, this equipment, combined with the acquisition of additional turntables, tape decks and logger tape machines for the AM station, would cost an estimated $60,000. Also to be included in this estimated cost is the immediate installation of a new work station in the newsroom at each undertaking.
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With respect to the FM authority, St. Lawrence underlined its intention to provide this new FM service to the under-30 Brockville audience within six months of a favourable decision. St. Lawrence further stated its intention to undertake a research study, at an estimated cost of $5,000 to $8,000, to identify the type of programming that would best meet the needs and desires of the under-30 audience.
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St. Lawrence also undertook to make a number of technical improvements to be implemented following approval of these share transfer applications, provided it achieved projected revenues.
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For CFJR, St. Lawrence proposed an improved night-time frequency, to be implemented six months after the FM undertaking goes on the air, based on it achieving its projected financial results for those six months. St. Lawrence estimated that this improvement would cost between $50,000 and $70,000 and would enable several thousand residents in thecommunities of Long Beach,Mallorytown, Lansdowne, Athens and Lyndhurst to receive CFJR in the
evenings. In addition, St. Lawrence proposed to convert CFJR to AM stereo at an estimated cost of $31,000, if it achieved its first year projections.
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However, consistent with past practice, the Commission has not taken into account the dollar amounts allocated for these conditional improvements in considering these transactions.
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The Decision
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The Commission has carefully considered the benefits outlined in the applications and has concluded that both parties to this transaction have adequately demonstrated that, notwithstanding the particular circumstances of this transaction, the proposed transfers of ownership are in the public interest and that the benefits accruing to these Brockville-area communities are commensurate with the size of the market to be served and the size of the undertakings in question.
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With respect to those benefits which are not easily measurable in terms of their dollar value, the Commission recognizes the commitment to the continuity of local orientation on the part of St. Lawrence, the stability and financial strength that the resources available to it will afford these undertakings and the degree to which St. Lawrence has proposed to become involved with the communities in the area to be served. It further recognizes the element of continuity and stability that will result from the retention of Mr. Radford on a consultativebasis and the local experience he will impart to the new licensee.
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The Commission also considers that those benefits which were quantified in monetary terms, including both direct and indirect expenditures, are significant and commensurate with the size of the market to be served.
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With respect to the issue of concentration of ownership, the Commission notes the family relationship that exists between the principals of St. Lawrence and CHUM; however, in light of James Waters' assurances that St. Lawrence operates as a separate, autonomous company from CHUM, and the fact that Commission approval is required prior to any future transfers of effective control of St. Lawrence or CHUM, the Commission is satisfied that this application does not raise any concerns with respect to concentration of ownership.
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After reviewing the circumstances of the proposed transfer, the Commission is also satisfied that approval of the transfer of control of this licensee, which has very recently been authorized to operate an FM station, will not compromise the integrity of the licensing system. The Commission notes that the transfer was motivated largely by personal problems beyond the control of the licensee and its shareholders, and has concluded, on the basis of the evidence tendered in support of the application, that Mr. Radford will not benefit financially from the transfer of his interest in the FM undertaking. In this regard, the Commission accepts the applicant's submission that the essentials of the deal were concluded prior to the granting of the FM licence and that the finalprice reflects that of the AM station only. The Commission also maintains its view, as stated in Decision CRTC 87-136, that the Brockville market would be best served by a joint operation. It therefore concluded that it would be undesirable to give separate consideration to the AM and FM licences.
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Fernand Bélisle
Secretary General
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