'CSI' doubles Alliance Atlantis Q1 earnings


TORONTO -- Stepped-up worldwide sales of its "CSI" franchise helped Canadian broadcaster Alliance Atlantis Communications nearly double its first-quarter earnings.

That's good news for Goldman Sachs & Co. as the Wall Street powerhouse will shortly take ownership of a half-stake in the "CSI" franchise as part of its $1.96 billion takeover of Alliance with CanWest Global Communications Corp.

Alliance said Tuesday it saw revenue from the "CSI" shows rise 74.3% year-over-year to CAN$162.3 million ($146 million) during the latest quarter citing "significant" second-window licensing arrangements with foreign broadcasters and a great number of episodes delivered internationally.

The direct profit from "CSI" rose 79% to CAN$62.3 million ($56 million), again on higher international sales, combined with a foreign exchange gain of CAN$1.5 million ($1.35 million).

Alliance CEO Phyllis Yaffe told analysts Tuesday that the "CSI" franchise was showing "exceptional performance" at present. CBS Prods. owns the other half-stake in it.

Overall, Alliance posted earnings of CAN$41.2 million ($37 million), nearly double the year-ago profit of CAN$21.5 million.

The bottom line also was buoyed by higher TV airtime sales, with cable channel revenue reaching CAN$78 million ($70.3 million), up from CAN$69.7 million.

TV advertising revenue jumped 16.1% to CAN$41.9 million ($37.8 million), while subscriber revenue rose 8.5% to CAN$35.7 million ($32.5 million).

In all, first-quarter revenue came to CAN$358 million ($322.5 million), compared with CAN$271.4 million in 2006.

Alliance shareholders already have signed off on the CAN$53 ($47.75) per-share sale of the company, as has the federal Competition Bureau. The next big hurdles for the deal -- which will hand CanWest Global 13 cable channels, while giving Goldman a half-stake in the "CSI" franchise and a 51% stake in independent film distributor Motion Picture Distribution LLP -- include regulatory approval from the Canadian Radio-television and Telecommunications Commission.

The CRTC will consider whether sufficient safeguards have been put in place by CanWest to ensure that Goldman does not exercise effective control over MPD or Alliance's cable channels as Canadian broadcasters and movie distribution companies are considered culturally sensitive entities.

Alliance is the latest Canadian media player to be taken over with mostly foreign investment. Atlantic Canada cable operator Persona Communications earlier went private with the CAN$360 million ($324 million) in financing mostly provided by U.S. private equity firm Hicks Muse Tate & Furst.

And Kohlberg Kravis Roberts & Co., the Blackstone Group and Cerberus are among the U.S. equity players recently rumored to be circling Canadian phone giant BCE Inc., which operates satellite service Bell ExpressVu and has a minority stake in national TV network CTV.

Another hurdle for Alliance is Movie Distribution Income Fund, which owns the remaining 49% stake in MPD. The company will argue in court that it has veto power over the proposed sale.

The legal challenge stems in part from Movie Distribution Income Fund seeking a say in who the Canadian partner will be after Goldman eventually purchases the entire movie distribution unit. Canadian law requires that Goldman have a Canadian partner to exercise effective control over MPD, ensuring foreign ownership restrictions aren't breached.

Executives at Alliance, looking ahead to a scheduled June 15 court date to hear Movie Distribution Income's veto bid, on Tuesday reiterated that the income trust's consent is not required to conclude the $1.96 billion takeover deal.

"We're confident that, given a little bit of time, that the new owners of MPD and the trustees can work through any issues that might exist," David Lazzarato, exec vp and CFO, said Tuesday.

Movie Distribution's legal gambit also is thought to be a maneuver aimed at extracting a higher takeover price by the Wall Street investment bank for its 49% stake in MPD, above the $9 per-unit value already placed by Goldman on Alliance's controlling 51% stake.

"Whether or not there's an offer for the remaining 49%, as has been speculated, I don't know. It's not a major concern for us," Lazzarato said.

The Alliance CFO also indicated his company expects to receive a ruling within weeks from the London Court of International Arbitration on financial issues stemming from Motion Picture Distribution LLP's 2004 purchase of Spain's Aurum Producionnes.