As Michael MacMillan and Seaton McLean cash out, risk-embracing CanWest Global Communications and partner Goldman Sachs & Co. have offered $2.3 billion to buy Alliance Atlantis Communications.

The deal will combine AAC’s 13 channels with Global Television to create a new broadcasting powerhouse with two conventional networks, 21 analog and digital specialty channels and a stake in five additional specialty channels.

The deal also sees CanWest Global CEO Leonard Asper breaking up in AAC the product of a historic 1998 merger that combined Atlantis Communications, cofounded in 1978 by MacMillan and McLean, with Alliance Communications, the house that Robert Lantos and Victor Loewy built.

Seizing AAC’s specialty channels is also a call to arms that promises an all-out battle between CanWest Global and CTVglobemedia for dominance of Canadian television.

‘The strong branding of the Alliance Atlantis channels combined with the reach of Global and CH will result in a very solid competitor to the CTV group and provide us an opportunity to grow not only in television but in our online and mobile activities as well,’ CanWest CEO Leonard Asper told his own and AAC employees in an internal announcement just before he publicly unveiled his complex pact with Goldman Sachs on Jan 10.

Keen to leave its balance sheet flexible for possible deals in New Zealand and Australia, where it is considering selling off broadcast holdings, CanWest Global is contributing only $132 million initially for a 17% stake in a combined entity.

That leaves Goldman Sachs to cover the rest of the purchase price for the new broadcast entity with a mixture of equity and debt, structured to neither impact nor impede the rest of CanWest Global’s operations.

Full marks for audacity, but Asper has a tough path ahead of him. Asper says CanWest Global has an option to buy out Goldman Sachs by 2011. But before that, he and Goldman Sachs will determine their share interests in the combined assets by where the operating profits of the respective Global Television and AAC specialty channels stand on Dec. 31, 2010.

If Global Television is earning more money than the AAC specialties at the time, CanWest Global will grab a controlling stake exceeding 50%. Asper could then buy Goldman Sachs out and spin off the new broadcast entity through a multibillion-dollar public offering.

But if AAC’s specialty channels generate more money, CanWest Global’s stake will fall below 50%, and Asper’s betting-the-farm growth strategy may not pay out.

The stakes are high. CanWest Global’s Canadian TV operations in 2007 are forecast to turn out $57 million in EBITDA, while AAC’s more profitable specialty channels are expected to generate $151 million in EBITDA.

The process by which CanWest Global and Goldman Sachs can cash out after 2011 will be more fully revealed when the shareholder agreement behind the AAC deal is soon presented to the CRTC and financial regulators.

Also to come are details on CanWest Global’s benefits towards Canadian production, likely to be around $150 million in total, according to Asper.

The CRTC will want to know who is left in charge of the new broadcast entity, out of foreign ownership concerns, while the Competition Bureau will separately weigh Goldman Sachs’ purchase of Motion Picture Distribution, the movie releasing business now off the market and to be run by an unspecified Canadian partner.

So CanWest Global will need to show it has creative and corporate control of the new broadcaster, and that Goldman Sachs will be content on the sidelines as a passive investor.

No regulatory concerns attend Goldman Sachs’ purchase of AAC’s half-stake in the CSI franchise. CBS will take over from AAC as international distributor of the popular crime series.

Critics are already lining up to block the deal.

Maureen Parker, executive director of the Writers Guild of Canada, is typical of those looking for the CRTC to exact higher expenditures by broadcasters on homegrown dramas after the CTVglobemedia deal for CHUM, and now CanWest Global scooping AAC.

‘We keep on hearing the same story from the broadcasters [that] they are losing money due to market fragmentation and have no money for Canadian drama,’ Parker says, pointing to such mega-acquisitions as evidence that broadcasters have deeper pockets than they are letting on.

Peter Murdoch, VP of media at the Communications, Energy and Paperworkers Union, says the CRTC and Ottawa cannot cede control of a domestic broadcaster to a Wall Street banking firm.

‘It might be the deal will have a labyrinth of nominal board members (for Goldman Sachs), but quite clearly the person or in this case the company putting out the cash in one way or another will have effective control over the company,’ he argues.

But David Zitzerman, an entertainment lawyer with Toronto-based Goodmans, says Goldman Sachs’ financing should not preclude CRTC approval.

‘Yes, [Goldman Sachs] gave majority financing and have a large interest. But they don’t have legal control because CanWest Global will have more than 50% of voting control,’ he says.