Quebecor blocked in Canwest bid

Media giant sought voting control of restructuring

TORONTO -- Quebec media giant Quebecor Media said it was set to make a play for voting control of restructuring rival Canwest Global Communications Corp., but was blocked from talking to key shareholder Goldman Sachs & Co.

Quebecor Media CEO Pierre Karl Peladeau in a Feb. 19 letter to Canwest Global's court-appointed representative, FTI Consulting, said it was in talks with RBC Capital Markets about bidding for a controlling stake in its struggling rival.

But Peladeau said the Quebec cable and broadcast group refused to sign a nondisclosure agreement "as it would have precluded Quebecor Media from having discussions notably with Goldman Sachs and related entities which we viewed as a key stakeholder."

The Ontario Superior Court of Justice, now directing Canwest Global's passage through creditor protection, on Friday gave its blessing to rival western Canadian cable operator Shaw Communications acquiring at least 20% of Canwest Global's equity and 80% of its voting stock for about $95 million in cash.

Greg Watson, senior managing director of FTI Consulting, in a separate Feb. 19 report to the Ontario court, said the confidentiality agreement that Quebecor Media refused to sign was "customary for an equity solicitation process," and that the field of possible new investors in Canwest Global had "been fully canvassed" before Shaw's bid emerged as the best option.

Goldman Sachs holds a 65% equity stake in CW Media Holdings, which comprises 13 Canadian cable channels that Canwest Global manages on behalf of the U.S. investment bank.

Goldman Sachs was part of a rival bid for control of Canwest Global led by Toronto equity firm Catalyst Capital, and which lost out to Shaw Communications.

Goldman Sachs' backing the rival bid was prompted in part by Shaw Communications indicating it will seek to renegotiate the 2007 shareholders agreement for CW Media Holdings and how its 13 cable channels are to be run.

Goldman Sachs in recent court filings has strongly criticized Canwest Global and Shaw for not disclosing their plans for the 13 cable channels, which remain a key profit engine for the Canadian broadcaster.

The winning Shaw Communications bid had backing from U..S. bondholders that now control Canwest Global's destiny and retain a blocking vote on its eventual recapitalization.

Quebecor Media's Peladeau said his company remains in the wings to take a run at Canwest Global should Shaw Communications withdraw its proposed transaction.

Shaw can only assume operational control of Canwest Global after it secures all court, shareholder and regulatory approvals to complete its recapitalization.

"Should the court re-order the current solicitation process and allow third party bidding in a transparent Court supervised process, Quebecor Media is prepared to consider an alternative proposal in a timely manner," he told the Canwest Global court-appointed monitor.
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