CanWest Restructuring Could Mean Newspaper Unit IPO Coming

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By: E&P Staff

CanWest Global Communications Corp., Canada’s biggest media company, restructured itself Wednesday in a manner that has most industry observers believing it intends to spin some of its newspapers into a so-called income trust.

Wednesday, a Globe and Mail story by Andrew Willis and Eric Reguly quoted unnamed investment bankers as saying CanWest will sell a minimum of 20% of its newspaper holdings for about C$400 million (U.S. $169 million), or as much as 40% of the holdings for double that amount. The Asper family, which controls the company through super-voting shares, would retain its control, according to his report.

CanWest owns the money-losing National Post, but also the profitable CanWest Publications, consisting of 13 daily metro newspapers — including the Montreal Gazette, Ottawa Citizen and Vancouver Sun — plus 48 daily and weekly community papers.

Income trusts are booming in Canada. The units, which are sold to investors, allow companies to avoid some corporate taxes by paying regular distributions to their holders from cash flow. Income trusts accounted for fully 69% of initial public offerings (IPOs) on the Toronto Stock Exchange in the first half of 2005, according to a PriceWaterhouseCoopers report earlier this summer.

Offering a trust could add C$5 per share to CanWest’s stock price, according to an analyst quoted by the Globe and Mail. Monday, CanWest stock closed C$15.40, up .94 cents on speculation about a trust IPO.

CanWest has made no secret of the fact that it is mulling an income trust IPO, which would be used to pay down its debt of C$3.2 billion and allow the chain to grow by acquisitions.

Under Wednesday’s restructuring, all CanWest’s Canadian papers, with the exception of the National Post, would be combined with the company’s CanWest Interactive Inc. unit to become CanWest MediaWorks Publications Inc. CanWest’s television, cable, and radio stations would be combined to form CanWest MediaWorks Inc. The National Post would become a subsidiary of CanWest MediaWorks.

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