ARCHIVED -  Decision CRTC 90-1069

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Decision

Ottawa, 17 October 1990
Decision CRTC 90-1069
CHUM Limited
Vancouver, British Columbia- 900265000 - 900264300
Following a Public Hearing in Edmonton commencing 15 May 1990, the Commission approves the applications by CHUM Limited (CHUM) for authority to acquire the assets of radio stations CHQM and CHQM-FM Vancouver from Q Broadcasting Ltd. (QBL), and for broadcasting licences to continue the operation of these undertakings.
The Commission will issue new licences expiring 31 August 1991 in respect of CHQM, and 31 August 1992 in respect of CHQM-FM, upon surrender of the current licences. The authorities granted herein are subject to the same conditions as those specified in the current licences, as well as to any other conditions that may be specified in the licences to be issued.
The Commission has considered CHUM's request that it be granted a full licence term of five years for each of the two stations, but has decided to set expiry dates to coincide with those of the current licences. The licence term of approximately two years accorded CHUM in respect of CHQM-FM will enable the Commission to consider renewal of this licence at the same time as that of other FM stations in the area, following the review of FM policy announced in Public Notice CRTC 1990-20 dated 16 February 1990. In the case of CHQM, the term of approximately ten months should be sufficient for CHUM to prepare and file, and for the Commission to consider, an application for the transfer of ownership of CHQM to a third party. This matter is addressed further below.
The vendor, QBL, is owned by John E. Stark and other shareholders long involved in the broadcasting industry in Vancouver and elsewhere in British Columbia. At the hearing, Mr. Stark indicated that he and his partners now wish to divest themselves of their broadcast holdings, essentially for estate planning purposes.
The purchaser, CHUM, is a public company controlled by Allan F. Waters of Toronto. While its broadcast holdings in British Columbia are currently limited to ownership of CFUN Vancouver, CHUM is one of Canada's largest and most successful broadcasters, and owns many radio and television stations serving both large and small markets across the country. It is also involved in the ownership of two national specialty network services.
Because the Commission does not solicit applications for authority to transfer ownership or effective control of broadcasting undertakings, and because there is thus only one proposal presented to the Commission, the onus is on the applicant in such cases to demonstrate to the Commission that the application is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
Concentration of ownership and diversity of voices are two such concerns, and these are raised in the present case as a consequence of CHUM's ownership of CFUN Vancouver. At the hearing, CHUM noted the Commission's longstanding policy that two undertakings of the same class serving the same market should not fall under common ownership. It emphasized, however, that CHQM and CHQM-FM had been offered for sale by QBL only as a block. For its part QBL confirmed that it was "...intent on selling them both as a package".
CHUM stated at the hearing that it was its intention to divest itself of ownership of CHQM to a qualified buyer at a price that represents "fair market value for CHQM-AM as it relates to this transaction". CHUM confirmed at the hearing that its proposed benefits package related to CHQM-FM only, and that responsibility for presenting the Commission with a separate benefits package in respect of the AM station would therefore be borne by the yet-to-be-determined third party purchaser of CHQM. The applicant stated that it had not taken any steps to identify or contact any potential purchasers for the Vancouver AM station, but indicated that it should be able to reach agreement for the sale of CHQM to a third party, and submit an application to the Commission for approval of that transaction, within six months of receiving CRTC approval of the current applications.
In accordance with the applicant's commitment, the Commission directs CHUM to ensure that an application for authority to transfer ownership of CHQM Vancouver to a third party, together with a suitable package of clear and unequivocal benefits, is filed with the Commission within six months of the date of this decision.
The purchase price to be paid by CHUM for the assets of the two undertakings is $11.5 million. The Commission is satisfied with the availability of the required financing, and with the purchaser's willingness to ensure that all licensing obligations are met, including commitments made by QBL in the context of past renewal applications, as well as those new commitments made by CHUM in the present applications.
Of concern to the Commission prior to the hearing was the information contained in the applications regarding CHUM's allocation of the total purchase price between CHQM and CHQM-FM. Specifically, CHUM had assigned a value of $6.325 million for the AM station, and $5.175 million for the FM. Based upon its consideration of various factors, including industry trends, as well as a comparison of the two stations' audience figures and their current and projected financial performance, the Commission's preliminary assessment prior to the hearing was that the value assigned to the AM property was inflated in relation to that assigned CHQM-FM. At the hearing, the applicant acknowledged that "...the allocation in the agreement perhaps doesn't reflect what the reality might be". It stated that it had therefore arranged for the preparation of an independent valuation of the stations in anticipation of its subsequent divestiture of CHQM. It offered to file the valuation on a confidential basis, "...inasmuch as it would have a material effect on the future negotiations we might have with a potential buyer for QM-AM (CHQM)".
The Commission, in the circumstances, has deemed the applicant's request for confidentiality to be reasonable. It has also reviewed and accepts the independent valuation of CHQM-FM filed by CHUM, and has assessed the proposed benefits with reference to that valuation. It is the Commission's longstanding policy, however, that the purchase price of broadcasting undertakings be publicly disclosed. Accordingly, the Commission advises CHUM that it will make public the independent valuation of the two Vancouver radio stations six months from the date of this decision.
In general, the Commission is satisfied that the benefits package attached by the applicant to its purchase of CHQM-FM is significant and unequivocal, commensurate with the size and nature of the transaction, and that it takes into account the responsibilities to be assumed by the purchaser, the characteristics and viability of CHQM-FM, and the scale of the programming, management, financial and technical resources available to CHUM. Moreover, the Commission is satisfied that approval of the transaction is in the public interest. As proposed by CHUM and assessed by the Commission, the significant and unequivocal benefits flowing from this transaction include direct, incremental expenditures totalling a minimum of $750,000 over a five-year period. The Commission expects CHUM to ensure that all of the $750,000 in direct expenditures proposed in the benefits package are made in accordance with the schedule outlined in the application. This is over and above the direct expenditures that CHUM will continue to make in fulfilment of all outstanding commitments made by QBL on behalf of the two stations, as set out in their current Promises of Performance.
Of the $750,000 noted above, $50,000 will consist of contributions of $10,000 made on behalf of CHQM-FM to FACTOR in each of the next five years. The applicant stated that these contributions would be earmarked for the production of Canadian musical recordings in the easy listening format, that being the format in which CHQM-FM operates. At the hearing, CHUM confirmed that it will maintain CHQM-FM's easy listening format. CHUM also indicated that it will expand the amount of specialty programming broadcast by the station and directed specifically to the arts; the Commission notes in this regard that CHQM-FM is one of the few private radio stations in the country that broadcasts operatic music on a regular basis.
The remaining $700,000 in incremental benefits proposed by CHUM will be directed to the creation and ongoing financial support of a new, non-profit foundation to be called "ArtsFACT", this being an acronym of its full name, the "Arts Foundation to Assist Canadian Talent". According to CHUM, the foundation's purpose will be:
 to recognize and encourage artistic expression in all major forms through a program of cash grants, bursaries, scholarships, matching funds, commissions and co-productions, stimulating the exploration of both traditional and alternative approaches to contemporary artistic endeavour both in music, theatre, dance, radio programs, live recordings, and other forms of cultural expression.
CHUM will contribute the sum of $500,000 as initial funding. This will be invested by the foundation and the interest earned will be used for the purposes noted above. CHUM also made a commitment to contribute an additional $40,000 annually to support the foundation's activities over the next five years.
CHUM indicated that decisions regarding disbursements by the foundation will be made by its six-member Board of Directors, which will include three members drawn from Vancouver's cultural community and three other members affiliated with CHQM-FM and designated by CHUM. The applicant was thus unable to provide specific details at the hearing as to what percentage of disbursements from the fund would be allocated to each of the endeavours targeted for support, or what proportions of the funding so disbursed would take the form of cash grants, as opposed to matching funds or the various other mechanisms identified by CHUM in its mission statement for the foundation. According to the applicant, appropriate guidelines in these areas will be established and implemented by the foundation's Board. The Commission requires CHUM to file an annual report on the operation and management of ArtsFACT, outlining the composition of the Board and details of the foundation's operations, including a description of the projects given financial support, the amount of this support, the terms under which it was offered and an assessment of results. The Commission expects CHUM to ensure that the composition of the Board adequately reflects Vancouver's arts community, and that access to financial assistance from the foundation is extended in a fair and equitable manner to all sectors of that community.
As noted earlier with respect to CHQM, no benefits have been attached by CHUM to the transfer of ownership of that station due to the special circumstances surrounding the transaction. The Commission therefore reminds CHUM that, until such time as approval is granted for the transfer of ownership of CHQM to a third party, it should manage the operations of the station with the same due care that would be expected of one operating in a fiduciary capacity. In this regard, the Commission notes the reduction in the amount of spoken word programming which was implemented by QBL earlier this year. In the Commission's view, in light of the special circumstances present in this case, any further proposals to alter the programming of this AM station should be presented in the context of a full and complete application for approval to transfer the ownership of CHQM.
It is a condition of each licence that the applicant adhere to the Canadian Association of Broadcasters' (CAB) self-regulatory guidelines on sex-role stereotyping, as amended from time to time and approved by the Commission. It is also a condition of each licence that the applicant adhere to the provisions of the CAB's Broadcast Code for Advertising to Children, as amended from time to time and approved by the Commission.
Alain-F. Desfossés
Secretary General

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