CanWest Confirms Newspaper Spin-off

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By: Mark Fitzgerald

Canada’s biggest media company, CanWest Global Communications Corp., confirmed on Thursday the long-running speculation that it would spin off an interest in its newspaper and interactive media holdings into an income trust, an increasingly popular maneuver that allows Canadian corporations to avoid some taxes by paying regular distributions to investors from cash flow.

CanWest said it would offer in Canada an initial public offering (IPO) in the newly created CanWest MediaWorks Income Fund that would hold about 28% of its newspaper and interactive media assets. The IPO will not be registered for sale in the United States, CanWest said.

The fund will not include its flagship — but money-losing — National Post. CanWest publishes 13 daily metro newspapers — including the Montreal Gazette, Ottawa Citizen and Vancouver Sun — plus 48 daily and weekly community papers. The Asper family will continue to control the company through super-voting shares after the IPO.

CanWest said it expects total proceeds from the sale to the new fund to be approximately C$1.45 billion (US$1.2 billion). CanWest will also be using money from a new C$500 million (U.S.$423 million), 5-year senior secured revolving credit facility, which has been underwritten by The Bank of Nova Scotia and Royal Bank of Canada, to retire debt and buy back some senior unsecured notes.

“We have been considering this transaction for some time, as a way to unlock what we believe is significant shareholder value,” CanWest President and CEO Leonard Asper said in a prepared statement. “We believe that this offering will be well received by the investing public.”

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