BCE, Quebecor to face off over ownership of Canadiens

The two media giants are the last ones in the game to buy the Habs

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The Gazette, Sunday, May 24, 2009

It appears there are only two players on the ice, Quebecor and BCE, in the bidding for the Canadiens and the Bell Centre. A faceoff of media giants in a convergence play involving an iconic brand.

There's not a lot of money to be made in owning the Canadiens, a high-maintenance, low-margin business. You could ask Eric and Steve Molson about that, and they'd tell you that they regarded it as a public trust, but that it wasn't always good for beer sales, especially when the team was going badly.

But for Quebecor and Pierre-Karl Péladeau, it makes a lot of sense in terms of convergence and synergies. Think about it. Quebecor has two big tabloid newspapers, Le Journal de Montréal and Le Journal de Québec, that feature huge coverage of the Canadiens every day. Moreover, the Bell Centre is an important show- business venue, and the Quebecor papers and supermarket tabloids live off the Quebec star system, starting with the Julie Snyder Starmania franchise on TVA. Then there's Vidéotron, the cable TV giant that carries the Canadiens' games on RDS.

But this is where it becomes interesting for BCE. Perhaps as a defensive play in the beginning, but also as a potential positioning play of it being seen as a company based in Montreal, and not going anywhere. There are also new media platforms multiplying, and if you can already get Canadiens updates on your cellphone, we might not be far from the day when you can actually watch the game on it.

BCE still owns 15 per cent of CTVglobemedia, which it paid way too much for back in 2000, and among the specialty channels in the family is RDS, which has the Canadiens' rights through 2012. RDS wouldn't be keeping those rights beyond that, not if the Canadiens were owned by Quebecor and Péladeau could put their games on TVA, which already has a dominant share of the Quebec television market.

Then, the building is called the Bell Centre, with BCE having acquired naming rights for $100 million over 20 years in 2002. At the time that was a defensive move, too. Bell executives didn't like the idea they might be looking down at the Telus Centre from their executive offices nearby at 1000 de la Gauchetière.

Well, Péladeau wouldn't like the idea of driving by the Bell Centre, either, not if he owned it, not with Vidéotron as a rival to Bell ExpressVu's satellite TV service, and not with Quebecor Media getting into the wireless spectrum space in Quebec and parts of Ontario.

So, Quebecor versus Bell. It would be quite a faceoff, but don't expect a bidding war. Quebecor has several profitable business units throwing off lots of cash. And Bell has very deep pockets. But both companies have people whose job it is to make a sound business case, do the due diligence, and persuade their boards. This isn't about sitting behind the Canadiens' bench, though that's part of the deal.

The cost? Well, the Canadiens have been valued at U.S. $300 million by Forbes magazine. And the Bell Centre was a $350-million project when it opened in 1996. But nobody will be foolish enough to offer anything like $650 million for the team and the building. Maybe $500 million. It has a ring to it, and George Gillett would probably grab it.

Here's an interesting footnote to this story. When BCE bought naming rights to the Bell Centre, Michael Sabia was executive vice-president of the parent company, and later became CEO until his departure last summer when they settled a closing date for the Ontario Teachers' Pension Plan to take BCE private in the biggest leveraged buyout in history. Of course, the deal fell through last November only two weeks before it was to close, which could be one of the reasons BCE now has the cash to do a deal for the Canadiens.

Sabia has since been named president and CEO of the Caisse de Dépôt, the Quebec pension fund, which just happens to own 45 per cent of Quebecor Media, having paid Ted Rogers a ton of money to walk away from buying Vidéotron back in 2003. (He bought the Toronto Jays and the SkyDome with the money, renamed the stadium the Rogers Centre, and put the baseball team on his own sports channel and his own cable system. It was great synergy, paid for by the Quebec pension plan).

So the cratering of Sabia's Teachers' deal in a sense gives BCE the cash to get in this game. And the Caisse's 45 per cent ownership of Quebecor Media makes it a big partner in Quebecor's bid on the Canadiens.

Just another coincidence in this small world of Montreal.

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