ARCHIVED - Broadcasting Decision CRTC 2003-22

Broadcasting Decision CRTC 2003-22

Ottawa, 23 January 2003

Canal Évasion inc.
Across Canada

Application 2002-0911-5

Transfer of effective control of Canal Évasion inc.

1.

The Commission received an application for the transfer of effective control of Canal Évasion inc., licensee of Canal Évasion, the French-language specialty television service devoted to travel, tourism and adventure and in operation since 31 January 2000.

The transaction

2.

The purchase price for the shares is $1,236,000. Based on the evidence filed with the application, the Commission has no concerns with respect to the availability or the adequacy of the required financing.

3.

The proposed transaction would be implemented through the transfer of all shares held in Canal Évasion inc. by Bell Globemedia Inc. (BGM) and consisting of 5,386,206 class "A" common voting shares, representing 53.5% of the licensee's voting interests, to Serdy Direct inc. or its affiliate company, Serdy Communication inc.

4.

Serdy Direct inc. currently holds a 19.9% voting interest in Canal Évasion inc. Serdy Direct inc. and Serdy Communication inc. (collectively Serdy) are owned by Messrs.
Serge Arsenault (80%) and Michel Chamberland (20%). Following this transaction, effective control of Canal Évasion inc. would rest with Serdy.

The benefits package

5.

Pursuant to the Commission's benefits policy outlined in Building on success - A policy framework for Canadian television, Public Notice CRTC 1999-97, 11 June 1999 (the Television Policy), the Commission generally expects applicants proposing transactions involving the transfer of control of television undertakings to offer a package of tangible benefits having a dollar value representing a minimum of 10% of the value of the transaction, as accepted by the Commission. In this case, 10% of the value of the transaction would amount to $123,600.

6.

The Commission notes that Canal Évasion has been operating at a loss since it began operating three years ago. The applicant indicated that the events of September 11 2001 and ongoing terrorist activities the world over are having such an impact on the travel industry in general that it does not expect to become profitable for several years.

7.

The applicant added that although Canal Évasion, as an analog service, has guaranteed distribution in Quebec, it is distributed on a "positive option" basis. This means that, unlike most other analog services, Canal Évasion must sign up its own subscribers directly. As a result, the service is not distributed as widely as other such services.

8.

The purchaser did not propose any tangible benefits in connection with this transaction, but did propose the following intangible benefits:

• the continued operation and revitalization of a service that currently has a large deficit;

• the increasing importance within the French-language television system of Serdy, a founding partner of Canal Évasion, and now the licensee's majority shareholder;

• the potential of Serdy, as the new majority shareholder, to revitalize Canal Évasion by applying its expertise, and its human and financial resources to generate visibility, originality, variety and high quality programming; and

• the purchaser, Serdy, is quite familiar with the service and has been a producer for many years through its subsidiary Serdy Vidéo, an independent production company whose television productions target French- and English-language Canadian television network audiences.

9.

In view of Canal Évasion's financial problems, the unique nature of the service it provides, and the public interest that would be served by the proposed intangible benefits, the Commission considers that an exception to the Television Policy with respect to tangible benefits is justified in this case.

Integrity of the licensing process

10.

The Commission examines the circumstances of transactions involving a change in the ownership or control of an undertaking soon after it begins operation, in order to ensure that the vendor does not stand to profit overly from the sale and that the integrity of the licensing process is maintained.

11.

At the time Canal Évasion inc. was licensed, the Commission had considered BGM's participation in the service and in particular the ability of its financial resources to ensure the launch of a specialty service whose programming would occupy a specific market niche. The sale of BGM's shares in Canal Évasion inc. so soon after the issuance of the licence could raise questions about the integrity of the licensing process, especially in competitive circumstances.

12.

The Commission has considered this matter and has concluded that, since the other shareholders will remain unchanged and wish to pursue operation of the service, it has no concern with respect to the integrity of the licensing process in the present case.

The Commission's decision

13.

In light of the particular circumstances of this transaction, the Commission approves the transfer of effective control of Canal Évasion inc. to Serdy and will amend its ownership records accordingly.

14.

The applicant must file the following information and documents with the Commission no later than 60 days following the date of this decision:

• advice as to whether the shares in Canal Évasion inc. have been transferred to Serdy Direct inc. or to Serdy Communication inc.;

• a signed copy of the share purchase agreement;

• a final copy of Serdy Direct inc.'s bylaw No. 1, as amended to comply with the Direction to the CRTC (Ineligibility of Non-Canadians) relating to the citizenship of board members; and

• the date of closing of the transaction.

Secretary General