Goldman, CanWest explain Alliance deal


TORONTO -- Testing Canadian foreign ownership rules, New York investment bank Goldman Sachs & Co. will hold a one-third voting stake in its broadcasting joint venture with CanWest Global Communications and a 64% equity interest, it emerged Tuesday.

Canadian broadcaster CanWest said that it will hold the remaining 36% equity stake in Alliance Atlantis Communications and two-thirds of the voting shares as details of its CAN$2.3 billion takeover of Alliance Atlantis were released.

The ownership structure will govern a joint venture, CW Investments Co., that will be formed by both partners after combining CanWest Global's Global Television network with the 13 Alliance Atlantis cable channels Goldman Sachs acquired as part of the takeover deal.

Without enough cash on hand to acquire Alliance Atlantis on its own, CanWest Global turned to Goldman Sachs to largely finance the CAN$2.3 billion ($1.99 billion) takeover.

Broken down, CanWest Global will make a CAN$262 million ($247 million) equity investment in CW Investments, while Goldman Sachs injects another CAN$472 million ($445.2 million).

To fill out the financing for Alliance Atlantis, CW Media Holdings, an affiliate of CW Investments, will offer senior secured credit facilities totaling CAN$525 million ($495 million) and another CAN$313 million ($295 million) in bridge loans, for a total opening debt of CAN$788 million ($743.4 million).

Disclosure of the debt arrangement for CW Investments comes a day after CanWest Global and Goldman Sachs abandoned plans for a high yield bond offering to support the Alliance Atlantis transaction, and opted instead for bridge financing from a syndicate of banks.

As Canadian regulatory authorities consider whether to green light the Alliance Atlantis takeover, they will assess whether Goldman Sachs is in a position to exercise effective control over the broadcasting joint venture, including how the Alliance Atlantis cable channels are programd and how and when they are sold.

Current Canadian law bars foreign interests from exercising effective control over domestic media assets.

Goldman Sachs also offered specifics Tuesday on how it will cash out of the Alliance Atlantis deal.

On March 31, 2011, CanWest Global and Goldman Sachs will divide up shares in the broadcasting joint venture based on the respective EBITIDA performance and debt levels of the TV assets.

As part of a complex formula, should the CW Investments debt on March 31, 2011 remain at CAN$788 million, CanWest's equity stake will be 50% if total EBITIDA is CAN$200 million ($188.6 million) in the year ending March 31, 2011.

And CanWest Global's stake in CW Investments will rise or fall by about 5% for each CAN$50 million ($47 million) in combined EBITDA above or below CAN$200 million.

The Canadian broadcaster's stake also will rise or fall depending on how CW Investment's debt load had risen or fallen.

CanWest Global and Goldman Sachs also put a CAN$1.5 billion value on Alliance Atlantis' 13 cable channels. The rest of the CAN$2.3 billion ($1.99 billion) price tag covers a 51% stake in a Canadian-based movie distribution company, Motion Picture Distribution LP and a 50% stake in the "CSI" TV franchise.

Both the Motion Picture Distribution and the "CSI" franchise will be acquired by Goldman Sachs.