ARCHIVED -  Notice of Public Hearing CRTC 1999-10-4

Notice of Public Hearing

Ottawa, 25 October 1999

Notice of Public Hearing CRTC 1999-10-4

ISSUE NO. 3

Further to its Notice of Public Hearing CRTC 1999-8-1 of today's date, the Commission announces the following:

THE WIC APPLICATIONS, SUMMARIZED BELOW, ARE ADJOURNED TO THE 6 DECEMBER 1999 PUBLIC HEARING TO BE HELD IN HULL, QUEBEC. THE COMMISSION NOTES THAT THE INTERVENTION PERIOD FOR THESE APPLICATIONS IS CLOSED, WITH ONE EXCEPTION REGARDING CANWEST GLOBAL COMMUNICATIONS CORP.'s INTERVENTION. IN A DECISION LETTER DATED 15 OCTOBER 1999, THE COMMISSION HAS EXTENDED THE DATE FOR THE FILING OF THE CANWEST INTERVENTION TO 26 NOVEMBER 1999.

THE COMMISSION NOTES THAT IF CERTAIN DOCUMENTS (see below) ARE FILED BY, RESPECTIVELY, 1 NOVEMBER 1999 AND 1 DECEMBER 1999, THE COMMISSION WILL FURTHER ADJOURN THE WIC APPLICATIONS SO THAT BOTH THEY, AND SUBSEQUENT APPLICATIONS RELATING TO WIC, MAY BE HEARD TOGETHER AT A PUBLIC HEARING TO BE SCHEDULED IN APRIL 2000.

Related Document: Notice of Public Hearing 1999-8-1, 25 October 1999.

Summary of Applications

a) Application (199900923) by WIC Western International Communications Ltd. (WIC) for authority to effect a change in ownership. If authority is granted, Shaw or an affiliate would be permitted to hold directly or indirectly 372,902.5 of WIC's class A voting shares. This would represent 49.96% of these shares.

b) Application (199902250) by WIC for authority to effect a change in ownership. If authority is granted, Shaw or an affiliate would be permitted to hold directly or indirectly 9,877,841 of WIC's class B non-voting shares. This would represent 52% of these shares.

The Commission will hear the applications as published, including the matters raised in Notice of Public Hearing 1999-8, reproduced below.

Background to the adjournment

On 5 March 1999, the Commission published Notice of Public Hearing 1999-2 for a hearing to be held on 3 May 1999 in Vancouver. At that time, the Commission was to hear the applications from WIC for authority to effect changes to its ownership.

On 1 April 1999, the Commission published Notice of Public Hearing1999-2-3 to advise that the Commission had withdrawn the WIC applications from the 3 May hearing in light of ongoing negotiations between Shaw Communications Inc. (Shaw) and CanWest Global Communications Corp. (CanWest) with respect to WIC and its assets.

On 9 September, in Notice of Public Hearing 1999-8, the Commission noted that WIC's applications raise important regulatory issues that require resolution in a timely fashion. Consequently, as the Commission had not had, for many months, any firm indication that an agreement had been reached between Shaw and CanWest, the Commission scheduled the applications for consideration at a public hearing on 26 October 1999 in Hull.

On 12 October 1999, CanWest, Shaw and Corus Entertainment Inc. (Corus) (collectively, the Parties) wrote to the Commission advising that they had resolved all of the significant commercial issues outstanding among them with respect to the WIC transactions. The Parties submitted that the 26 October 1999 public hearing should be suspended pending the filing of the Applications, which, they submitted, represent "the complete resolution to WIC's current ownership issues". The Parties' submissions are described in further detail in Notice of Public Hearing 1999-8-1, also issued today. WIC and Cathton Holdings Ltd. supported the Parties' request by separate letters dated 12 October 1999.

On 15 October 1999, the Commission issued a decision letter adjourning the WIC applications. The Commission stated that, in the circumstances:

"...[t]he Commission has decided to adjourn the hearing of Application Nos. 199900923 and 199902250 (the WIC Applications) to the public hearing commencing 6 December 1999 in Hull, Quebec. If an executed copy of the Definitive Agreement is filed with the Commission by 1 November 1999, and if the Applications are filed with the Commission by 1 December 1999, then the Commission will further adjourn the WIC Applications so that both they, and the Applications, may be heard together at a public hearing to be scheduled in April 2000."

Matters raised in Notice of Public Hearing 1999-8

In March of 1998, the Griffiths family sold its interests in WIC to Shaw Communications Inc. (Shaw) and Cathton Holdings Ltd. (Cathton). As a result of this transaction, each of Shaw and Cathton now holds just short of 50% of the class A voting shares. The Commission notes that the acquisition by Cathton does not require prior Commission approval as it previously owned more than 30% of the voting shares. However, Shaw's acquisition triggers the regulatory approval process. Furthermore, Shaw subsequently made a public offer to acquire all of the outstanding non-voting class B shares of WIC. The offer resulted in Shaw holding approximately 52% of these shares which also requires regulatory approval.

The Commission points out that pursuant to its regulations, prior approval is required both with respect to Shaw's purchase of the class A voting shares as well as Shaw's purchase of 50% or more of WIC's total equity. The Commission notes that the transactions leading to Shaw's acquisition of the class A voting shares were completed prior to obtaining approval from the Commission as required pursuant to its regulations. Further, Shaw did not seek Commission approval in advance of the transactions to put in place trust arrangements pending Commission approval.

On 2 April 1998, the Commission approved the trust arrangements that had been put in place with respect to the class A voting shares of WIC purchased by Shaw from Western Broadcasting Company Ltd. (WBC), which is owned by the Griffiths family. In its approval letter, the Commission stated that "a trust arrangement is necessary, at this point in time, in order to provide for an appropriate mechanism to enable the continued operation of WIC and its subsidiary companies independently from Shaw". The Commission also noted:

The transaction with respect to the WBC shares was completed prior to obtaining approval from the Commission and without seeking Commission advice on the appropriateness of meeting regulatory requirements in these circumstances by having recourse to a trust arrangement. Accordingly, the Commission expects that this concern be fully addressed by WIC and Shaw upon filing the necessary applications to obtain all regulatory approvals with respect to the WBC shares.

With respect to the class A voting shares of WIC purchased from Daphne Holdings Ltd., the Commission noted that Shaw undertook not to exercise voting rights in respect of these shares in a manner that would be contrary to the terms or intent of the trust agreement with respect to the WBC shares. The Commission's approval of the latter was made conditional upon Shaw fully respecting this undertaking. The Commission's approval of the trust arrangements (pursuant to several extensions) is valid until 30 September 1999 [the Commission notes that the trust arrangements have been further extended to 31 December 1999].

By letter dated 5 June 1998, the Commission approved inclusion of the class B non-voting shares in the trust.

The Commission notes that WIC and Shaw are both involved in many broadcasting sectors such as radio, television, pay and specialty services. Shaw also operates broadcasting distribution undertakings. The Commission intends to discuss, among other questions, the level of concentration and cross-ownership that would result from the transactions, and the impact that may occur on the broadcasting industry. In addition, the Commission may want to discuss at this time the necessity of unequivocal tangible benefits considering the size and nature of this transaction and the uncertainty surrounding the effective control of WIC. In addition, the Commission may wish to discuss specific proposals for unequivocal tangible benefits.

Further, the Commission may wish to discuss with interested parties whether it would be appropriate, in the circumstances, if authority were granted, for WIC to divest of part of its broadcasting holdings.

Secretary General