Take a large, public company in the process of reorganizing its ownership structure, add in its simultaneous competitive $1.4-billion takeover bid for a Canadian Radio-television and Telecommunications-regulated company, and you’ve got one of the biggest Canadian business stories of the past 12 months.
The Bell Globemedia Inc. (BGM) $1.4-billion acquisition of CHUM Limited — the financing of which was completed just a few short weeks ago — thrust this iconic Canadian empire into the media spotlight throughout the summer. One of the key lawyers behind this complex and unique bid — André Serero, group vice-president, legal and corporate secretary for BGM and CTV Inc. — is among INHOUSE’s Corporate Counsel Newsmakers of the Year.
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INHOUSE canvassed more than 100 managing partners and senior corporate lawyers, who in turn canvassed their colleagues, at firms across the country to identify some of the year’s biggest news-making in-house counsel.
Serero’s name popped up over and over again, with many lawyers noting the size, complexity, and delicacy of the matters he’s been handling this year.
Serero, who has been with BGM since 2001 and Bell Canada International Inc. from 1994-2001, started out at Phillips & Vineberg (now, Davies Ward Phillips & Vineberg LLP) in 1987. Since making the jump to in-house more than 12 years ago, Serero has never looked back.
He tells INHOUSE the reorganization of BGM and the bid “was a first in a lot of respects for me. There were a lot of unique aspects to this — the profile of the company, the regulatory aspects, the complexities around our own ownership structure, the dual-class nature of CHUM and the grandfathered non-voting stock, and the size of it — you want to make sure that everything gets done right and the timetable is such that everything is compressed into a very, very tight timetable.”
And a tight timetable it was. In December 2005, he was in the final stages of closing the recapitalization of BGM — which owns CTV Inc., 21 conventional TV stations, and 17 specialty TV channels — when the CHUM acquisition possibility arose.
Other BGM investments include: a 15 per cent interest in Maple Leaf Sports and Entertainment, which owns the Toronto Maple Leafs, Toronto Raptors, and the Air Canada Centre; and a 50 per cent interest in Dome Productions, a North American leader in the provision of mobile high definition production facilities.
At the time, BCE Inc. owned 68.5 per cent of BGM and Woodbridge Co. Ltd., the Thomson family investment company, owned 31.5 per cent. The reorganization saw BCE’s ownership go down to 20 per cent, Woodbridge became the largest shareholder at 40 per cent, and the Ontario Teachers’ Pension Plan and Torstar Corp. entered the fold.
“At the time that the CHUM acquisition came up for review, we had not yet received final approvals from the CRTC or the Competition Bureau to proceed with every organization,” he says. “So we had to deal with the different possibilities in making an offer to buy CHUM.”
Serero says that once BGM decided to put in a bid for CHUM, “as in almost any public takeover bid, you have to move fast.” And a small group at BGM worked like mad to launch the bid in a span of just over two weeks.
A unique aspect of the bid was CHUM’s dual class of shares. Voting shares were controlled by the Waters family — CHUM’s founder, Allan Waters, passed away in December of last year — and it had a class of non-voting shares that the Waters family owned roughly 13 per cent of and the rest were more broadly held by large financial institutions.
Common shares traded at a higher price than the non-voting shares and Serero had to address the issues in the pricing of the bid “in a way that reflected that the commons traded at a premium, but yet make the offer fair for all of the shareholders.”
He says these types of bids don’t come up that often, “particularly for companies where the non-votings don’t have coattails.”
In 1987, the Toronto Stock Exchange made coattails mandatory for all newly listed dual class shares,
but CHUM had introduced B shares before then so they were grandfathered.
“We were able to structure a bid that allowed for differential pricing, recognizing that it would come under some scrutiny and that it had to meet all of the regulatory OSC requirements and also pass the smell test in the market,” he says.
The bid was also competitive and BGM didn’t know who the other bidder was “but we knew that the family was holding basically an auction and it had invited another large media player to bid.
“That created for some important strategizing and some pretty intense moments in terms of how to structure the bid, so that not only would it be the winning bid but that it would also pass all of the legal and regulatory requirements — if and when it got approved.”
A recently reorganized BGM held a number of board and shareholder meetings in a two-and-a-half-week span leading up to the bid.
“It was really enlightening because we have the privilege of having some of the strongest companies invested in BGM and our shareholders in BGM, so having that kind of strength and know-how on our board was really spectacular,” Serero says.
Once the news of the bid broke, he, colleague Kevin Assaff, and other members of the company’s five-person legal team got to it, with a corporate and M&A team from Torys LLP, headed by Richard Balfour, and CRTC regulatory advice coming from a team at Goodmans LLP, headed by Kathryn Robinson and Robert Malcolmson.
The CRTC angle is important, says Serero, because most of CHUM’s assets are regulated.
“We’re basically taking all of the regulatory risk because we’ve now completed the offer and made payments to all of CHUM’s shareholders, and because these are regulated assets our ownership of CHUM has gone into trust since September 12, 2006, so we’re not allowed to influence CHUM until there’s any regulatory approvals and we’re not guaranteed of what the regulatory approval outcome is going to be. . . .
“We’ve basically paid the shareholders of CHUM upfront but are essentially running the risk that the approvals will come in a way that’s satisfactory to us.”
Another hiccup was Jarislowsky Fraser Limited — an investment fund firm and owner of about 15 per cent of CHUM’s B shares — which publicly protested to the OSC about the difference in the pricing of the shares, which garnered further press around the deal.
The OSC found BGM’s bid was fair, and as INHOUSE went to press, the offer closed with 99 per cent of the common shares and 98.5 per cent of the B shares tendered — “which by most measures is a pretty spectacular result, which I think is a good endorsement of the bid and the fairness of the bid,” Serero says.
From beginning to end, the process took just over two months, which Serero says made for a less-than-ideal summer with his family.
“It was a very intense process but obviously we had a team that was highly energized here and we consider CHUM to be a prized asset and an opportunity like that doesn’t come around very often in our industry.”
The team is putting the final touches on the transactional part of the structure and is now going to be mapping out the regulatory approvals, which could take anywhere from six months to a year.
Here’s hoping Serero — who was genuinely surprised, appreciative, and humble about being recognized by his peers for his work — catches up on some well-deserved downtime.
Honourable Mentions
During INHOUSE’s quest to find other Corporate Counsel Newsmakers of the Year, several names frequently came up from managing partners and senior corporate lawyers across the country. These notables include:
David Calabrigo, general counsel for Canfor Corp.:
As GC of Canfor, an integrated forest products company based out of Vancouver, Calabrigo has been busy this year with the reorganization of the company to separate its pulp business from its solid wood and panel
business. A 20 per cent interest in the pulp business, worth about $900 million, was placed into an income trust, listed on the TSX, and distributed to Canfor’s shareholders. On top of that, Calabrigo was involved in negotiations in the U.S. softwood lumber dispute, Canfor’s disposition of its coastal operations, and its acquisition of New South Companies Inc.
Jean-Marc Ruest, general counsel for James Richardson International Limited:
As GC for Canada’s largest privately owned agribusiness, Ruest helped guide Winnipeg-based JRI through a legal dispute with the Canadian Grain Commission (CGC). A labour dispute in 2002 involving Vancouver grain elevator operators and unionized grain handling employees, saw the CGC not allowing its inspectors to cross a picket line to provide official inspection but refusing to let JRI ship its grain without approval. The matter went to Federal Court, and ruled in JRI’s favour this summer and was very critical of the CGC’s conduct.
Robert Côté, vice-president legal affairs private equity for Caisse de dépôt et placement du Québec:
In addition to spearheading the financial institution’s public and private pension and insurance plans, privatizations, and auction projects in and outside Canada, Côté headed the Caisse’s legal team in an
international consortium’s $20.5 billion takeover bid of the British Airport Authority, the world’s largest operator of airports. The Caisse will hold 28.1 per cent of the consortium’s shares, which are also held by Grupo Ferrovial of Spain and GIC Special Investments of Singapore.
Patrick Garver, executive vice-president and general counsel of Barrick Gold Corporation:
Barrick, a leading international gold mining company, with a portfolio of operating mines and projects located globally, completed its acquisition of Placer Dome in March 2006, securing Barrick’s position as the world’s leading gold company. As a result of the acquisition, Barrick now operates 27 mines around the world and it has an unrivalled pipeline of projects. At press time, Barrick filed a tender offer statement related to its tender offer for the outstanding common shares of NovaGold Resources Inc.