No longer holding off for the CRTC to change its policy on cable ownership, Corus Entertainment finally bit the bullet and sold its 50% interest in Family Channel to the most likely bidder, Astral Media.

And in an almost simultaneous move, Corus sold its pay-per-view channel Viewer’s Choice to its separately traded mother corp., Shaw Communications, and bought the highly sought-after Winnipeg-based Women’s Television Network.

"We staged the transaction in a way that we could aggressively bid for WTN"so we could swap 50% of Family for 100% of WTN," says John Cassaday, Corus president and CEO.

Corus agreed to sell its Family interest to Astral – which already owns 50% of the channel – for $126.9 million. Viewer’s Choice fetched $35 million and WTN, which was put on the block after Shaw acquired Moffat Communications in December, was purchased for $205 million in cash.

While some observers suggest the price for WTN is high, Cassaday says bidding against three aggressive players "confirmed our view that the property was being looked at as scarce beachfront property."

These latest transactions bring Corus’ debt position to $550 million, which does not inhibit the company’s acquisition power, says Cassaday, who also confirms that Corus will not be buying any more specialty TV assets before the digital channel launch in September.

And with the launch of the new digital specialties approaching, bundling the reputable WTN with CMT and Corus’ two Category 1 licences – The Documentary Channel and Land & Sea – makes for a more compelling offering.

With the $205-million purchase comes a 10% benefits package that will "explode" the opportunity for the development of indigenous programming, particularly in the area of MOWs, says Cassaday. "Because of our movie franchise in Western Canada, we can trigger Canadian production."

While Corus intends to keep the WTN management team in place, Cassaday says he’s looking to make the channel into the Canadian equivalent of Lifetime, the number-one cable network in primetime in the U.S.

Unfortunately for Cassaday, he will not be able to do the same for Family. In a final call by the CRTC, Corus was ordered to sell the channel, which owns 40% of Teletoon, by the end of March.

In December, the CRTC began a review of cablecos’ ownership of specialty and pay-per-view services, which compelled the media company to ask for a six-month extension on the deadline.

Clearly, Corus wanted to hold off on a sale in the event the regulator changed its policy, even though the conflict runs deeper than cable ownership policy – Corus’ ownership of YTV and Treehouse also creates competition issues. Nelvana’s 20% interest in Teletoon doesn’t help the cause either (although it’s been put in trust for now).

In early March, a week before the Family deal was announced, Corus suggested it would sell the asset with a buyback provision, should the CRTC change its cable ownership policy.

But that didn’t fly.

"We ultimately concluded that we can’t own everything," says Cassaday, adding: "We wanted to demonstrate that we were respectful of the decision the commission had made in regards to the Family Channel and we just decided to move on."

Astral’s 50% ownership position in the channel since its launch in 1984 gave it the first right of refusal on Corus’ stake.

Under the deal, Astral comes out with 100% ownership of Family and increases its 20% interest in Teletoon to 40%.

Astral president and CEO Ian Greenberg says Disney Channel provides between 50% and 60%, the maximum, of Family’s programming. The Cancon requirement is 30%. "We continue to acquire all the new programming Disney Channel puts on their U.S. service. The contract has years to run yet," he says.

Greenberg also confirms that there are no plans to try to acquire Nelvana’s 20% share in Teletoon. "The negotiations with Corus were done on an amicable basis, and as long as they are owners of Teletoon we look forward to having a close relationship and maximizing the potential. I’m sure Nelvana will continue to be a good supplier in the future."

Astral does, however, have its eye on Cinar’s interest in Teletoon, although it has yet to meet with Merrill Lynch on the company’s potential sale.

"The process has just started. The books [Cinar financials] were just released on Friday [March 9] or Monday [March 12]. But it is unknown as yet whether it will be sold as one continuing entity or whether it will be broken up," says Greenberg.

In response to the many consumer press stories about Astral’s impending sale, typically mentioned in the same breath as Alliance Atlantis and CHUM, Greenberg says the $127-million deal with Corus "underscores our determination to continue to grow as one of the country’s major media companies."Hopefully this is not going to be our last acquisition. This will allow Astral to have the financing and credit lines available should [we] find another acquisition opportunity. To be an acquirer, we think it’s important to be in a very strong financial position."

Which also explains why Astral undertook a quick financing for the deal, announcing a new treasury share issue on March 8 with gross proceeds of $100 million (2.13 million class A non-voting shares at $47 a share). The underwriting syndicate is led by Scotia Capital and is expected to close on or about March 27.

Greenberg says cash reserves are in the $30-million to $35-million range. "At the end of the day after we do this acquisition we will still be a debt-free company."

Back in the Corus camp, while the company fought as long as it could to keep possession of Family, its decision to sell Viewer’s Choice to Shaw was a long time coming, confirms Cassaday.

Because pay-per-view is a distribution-driven business, strongly integrated with programming schedules and billing systems, Cassaday argues a distributor can handle it better than a programmer does.

In the U.S., distributors own all pay-per-view services.

The three deals are subject to CRTC approval. *

-www.corusent.com

-www.astral.com