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Public Notice
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Ottawa, 28 September 1989
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Public Notice CRTC 1989-110
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Background to Decisions CRTC 89-766 to 89-771 Relating to Applications for the Transfer of Effective Control of the Broadcasting Undertakings Owned by Selkirk Communications Limited to Maclean Hunter Limited and Others
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In January 1989 the Commission received applications for approval of a sequence of share and asset transfers representing a plan for the transfer of control of Selkirk Communications Limited (Selkirk) and of the various broadcasting undertakings owned by Selkirk to MH Acquisition Inc. (MHA), a wholly-owned subsidiary of Maclean Hunter Limited (MHL), for the reorganization of MHA's holdings, and for the subsequent transfer of control of certain of the former Selkirk broadcasting undertakings to other parties. The applications were gazetted in April and were heard during a five-day public hearing in the National Capital Region commencing 29 May 1989.
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Selkirk's broadcast holdings are extensive and diverse. Through two subsidiary companies, Mountain FM Radio Ltd. and Selkirk Broadcasting Ltd., Selkirk has indirect ownership of some 23 FM and AM radio stations in such communities as Victoria, Vancouver, Edmonton, Calgary and Brampton, and has further indirect ownership of various radio network undertakings that offer news, talk and music programs to Selkirk's own and other radio stations on a syndicated basis.
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In television, Selkirk owns 100% of the licensee companies operating CFAC-TV Calgary, CFAC-TV-7 Lethbridge and CHCH-TV Hamilton, and 50% of the voting shares in Okanagan Television Co. Ltd. (Okanagan), the licensee of CHBC-TV Kelowna. It is the sole owner, indirectly, of cable systems serving approximately 135,000 subscribers in the metropolitan Ottawa area, Pembroke and other Ottawa Valley communities. Selkirk also holds a 36.9% interest in British Columbia Broadcasting Company Ltd. (BCBC), as well as minority interests in Canadian Satellite Communications Inc. and Cybermedix Limited (owner of CableNet Limited, with various radio and cable holdings). In addition, at the time the applications were heard, the Commission had before it outstanding applications by a holding company of Selkirk to acquire the assets and for licences to continue the operation of CKOI-FM and CKVL Verdun, Quebec.
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Control of Selkirk is currently exercised through a voting trust representing 80% of the company's Class "B" voting shares. Beneficial ownership of these shares rests with eight individuals, each with 10% and each serving as a director of Selkirk. The voting trust was established in 1983 for the purpose of ensuring that the 80% of the Class "B" shares are voted as a block.
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The 20% of the Class "B" shares that remain outside of the voting trust are held by Southam Inc. (Southam), whose representation on Selkirk's Board of Directors is restricted to two of its ten members. While not in a position to exercise control of Selkirk, Southam, until recently, held 47% of Selkirk's issued and outstanding Class "A" non-voting shares and was by far that company's largest equity holder.
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The current applications were precipitated by Southam's decision, in October 1988, to sell its Selkirk shareholdings. Later that month, it was announced jointly by Southam and MHL that the latter was prepared to make a public offer to purchase all of the outstanding non-voting Class "A" Selkirk shares at a price of $45.00 per share. MHL later raised its bid for the Class "A" shares to $49.50 each and, pursuant to that offer, acquired virtually all of the issued and outstanding shares of that class.
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At the hearing, Selkirk's Chairperson and Chief Executive Officer, Mrs. Donna Kaufman, stated that MHL's offer to purchase all of the publicly-traded Class "A" shares of Selkirk, and not just those owned by Southam, was consistent with Ontario Securities Commission requirements designed to protect minority shareholders of publicly-traded companies. Mrs. Kaufman added:
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We were advised in view of this that once Southam made its decision to sell its stake in Selkirk, Selkirk could not remain as it was. Furthermore, our legal and financial advisers told us that potential purchasers were unlikely to keep the company intact and that its break-up was virtually inevitable.
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Mrs. Kaufman indicated that members of the voting trust therefore decided to terminate the trust and tender their Class "B" voting shares for sale to MHL, subject to CRTC approval.
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In the applications considered at the public hearing in May, and as a first phase in the overall divestiture plan, it was proposed that all of Selkirk's voting shares be transferred from their present owners to MH Acquisition Inc. (MHA), a wholly-owned subsidiary of MHL. Contingent upon CRTC approval of this first phase, MHA proposed to reorganize the ownership structure of the various broadcasting interests held by Selkirk through the sale of various assets, including fixed assets and shares of its subsidiary companies, to a number of new companies, or NEWCOs, which would be incorporated as wholly-owned subsidiaries of MHA, and, in the case of the radio network undertaking operated under the name and style of Westwood One Canada, to Key Radio Ltd. (KEY), an existing, wholly-owned subsidiary of MHL. In the case of the two Verdun radio stations, assuming Commission approval of the transfer of assets mentioned above, ownership would remain in the hands of the applicant holding company (163831 Canada Inc.), ultimately controlled by MHL.
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As a third and final phase, conditional on Commission approval of the first two, it was proposed that control of certain of the NEWCOs be transferred through the sale of 100% of their voting shares to various third parties.
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In some instances, the applications to transfer control of Selkirk properties to third parties reflected MHL's conclusion that it does not possess the skills and experience required to manage effectively the properties concerned: "We had to make judgement calls as to which properties we could best handle, and which would be best left to others."
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In some other cases, MHA considered it necessary to find third party purchasers for certain Selkirk broadcasting undertakings because of the Commission's policy against the common ownership of two broadcasting undertakings of the same type in any given market. MHL's retention of the independent stations CFAC-TV Calgary or CFAC-TV-7 Lethbridge would thus be contrary to this policy due to MHL's existing indirect ownership of the CTV affiliates CFCN-TV Calgary and CFCN-TV-S Lethbridge. A similar situation presented itself in respect of CFAC Calgary and CIRK-FM Edmonton, given MHL's effective control of CFCN Calgary and, at the time of filing, of CKNG-FM Edmonton.
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Accordingly, applications were submitted to transfer ownership of CIRK-FM Edmonton to Westcom Radio Group Ltd. (Westcom Radio) and CFAC-TV Calgary, CFAC-TV-7 Lethbridge and their rebroadcasters to Westcom Television Group Ltd. (Westcom Television), both wholly-owned subsidiaries of WIC Western International Communications Ltd. of Vancouver, and ownership of CFAC Calgary to Rogers Broadcasting Limited (Rogers) of Toronto. Rogers also applied to purchase all of Selkirk's other radio interests in western Canada, except for CJCA Edmonton. Westcom Radio was the prospective purchaser of that Edmonton AM station, while Westcom Television applied to purchase all of Selkirk's television interests in Alberta and British Columbia, including Selkirk's 36.9% shareholding in BCBC and its 50% interest in Okanagan.
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In the end, MHL proposed to retain effective control of Selkirk properties representing approximately half of the amount paid to purchase the voting and non-voting shares of Selkirk. These properties include CFNY-FM Brampton which, MHL noted, would form an obvious fit with its existing Toronto AM station CKEY and its other Ontario radio operations. It was also proposed that MHL retain effective control of certain Selkirk radio network operations, the Ottawa area cable television undertakings, CKOI-FM and CKVL Verdun, and various other Canadian or foreign holdings unregulated by the Commission.
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For the reasons set out in Decision CRTC 89-766 of today's date, the Commission has approved the first phase of the transaction, namely the transfer of effective control of the regulated broadcasting undertakings owned by Selkirk from its present shareholders to MHA. The Commission has denied the proposal to transfer the assets of the two Verdun stations to Selkirk's holding company (Decision CRTC 89-767). All elements of the second phase involving the reorganization of Selkirk's holdings under MHL's control, through MHA, Key and various NEWCOs, are approved.
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Of the applications forming the third phase, these being the proposals to transfer ownership of certain Selkirk properties to third parties, in today's Decision CRTC 89-771 the Commission has approved all of the applications by Rogers for the acquisition of the various Selkirk radio holdings in British Columbia and Alberta. Similarly, in Decision CRTC 89-769 the Commission has approved Westcom Television's applications to acquire control of Selkirk's television holdings in Western Canada. The Commission has, however, denied Westcom Radio's bid for ownership of CIRK-FM and CJCA Edmonton (Decision CRTC 89-770), and the application to transfer effective control of CHCH-TV Hamilton to CFPL Broadcasting Limited, the licensee of CFPL-TV London (Decision CRTC 89-768).
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A total of 680 interventions were filed with the Commission in respect of the various applications before it at the 29 May Public Hearing. The interventions were submitted by individuals, the owners or managers of small and large businesses, elected representatives, community groups and institutions, representatives of the broadcasting and other related industries and charities.
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Of the interveners, only five clearly identified themselves as being opposed to approval of the applications, while 13 others submitted comments about various aspects of the proposals. Many of the interventions containing comment or expressing opposition addressed the issue of concentration of ownership of licensed broadcasting undertakings, an issue which is dealt with at length in today's decisions. Certain other interventions in this group pertained specifically to the application for the transfer of control of CFNY-FM Brampton and expressed a strong wish that the station maintain its role and format as an "alternative" radio station. In its decision, the Commission notes MHA's commitment in this regard. All of the remaining 661 interventions were in support of one or more of the applications. The Commission wishes to thank the interveners for their views, all of which have been carefully taken into account.
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Fernand Bélisle Secretary General
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