Asper: Dispelling the misconceptions by Grant Surridge
Source : Ottawa Citizen
November 21, 2008
Worldwide, the media industry is grappling with shifting audiences, greater competition and a softening economy. Canwest Global Communications Corp. is no exception with concerns about its stock price, debt levels and corporate strategy. In an interview this week with Grant Surridge of the Post, CEO Leonard Asper responded to these and other issues. This Q&A was requested by The National Post and not Canwest, which owns this newspaper.
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Q: The stock price is obviously quite low. What story are investors not getting?
A: They're focusing too much on the debt and they're not focusing on the healthy aspects of our businesses. This is a time where, really since June 2007, that's when the credit crunch started and the same company was trading at $8 or $9 a share.
So if you trace it back, it's just a complete paranoia about companies who have debt. Our operating profits were up 13% this year. The underlying businesses that we own are up 13% in this economy and I think that's a huge accomplishment.
Everybody right now is so risk averse and there is still a number of misconceptions out there about the Goldman Sachs deal.
Q: What is the biggest misconception for most people about the Goldman Sachs deal ?
A: The biggest thing that people don't understand, is that they think that Canwest, that's the public company, is going to have to pay Goldman Sachs $1-billion in 2011, and it's just fundamentally wrong... There's never a circumstance in the world, where these guys say 'you guys owe us money.'
Q: In terms of addressing the debt, are you looking at selling assets?
A: I'd say our number one priority is to strengthen the balance sheet. We've taken some small steps, the U.K. radio stuff, closing some community newspapers that were not making money, closing a couple of cable channels, just culling the herd so to speak. So we're looking at any other underperforming assets and saying if there's no path to profitability, lets' get rid of it, let's close it down, let's sell it, whatever. I think the second thing is to really hunker down...there's two ways to improve your balance sheet, one is to reduce the debt, the other is to improve your profits. Just like any company we're focused like hell on the operating costs.
You've seen memos going out to staff in every company right now that Christmas parties are cancelled and travel's curtailed and hiring freezes and job cuts. We're no different than any other company in that regard. In some cases we kind of beat a few to the punch. You saw CTV sent out a memo[Wednesday] and Corus just sent out one [yesterday].
Q: What price, or what options were on the table when you were looking at selling [Australia's]Network TEN [two years ago]?
A: There wasn't really an offer.We received nothing. No formal offer. The price had run up on the announcement we hired an investment banker. If we had at the time sold TEN for half its market value we would have been told we were crazy. We're better to collect the dividends on an asset than sell at half its value. Values are going to come back, and people who are savvy market dealers know that.
Q: What is the nature of Prem Watsa and Fairfax Financial Holdings' investment in Canwest?
A: It's passive, they've been very public about it. It's obviously a huge seal of approval, it's a principal whose managing their own company's money as opposed to fiduciaries who are managing someone else's money. It's a strong statement somebody's taking the risk with their own capital. You can see fund managers have to be a bit more conservative and that's why they're more concerned about debt and have less ability to focus on asset value, strategy and the longer term.
Q: Are you at a disadvantage because your main rival is a private company?
A: It's a disadvantage from a communications standpoint. Because everything we do is so much under a magnifying glass, more under a magnifying glass than we would be if we weren't Canwest and the National Post. The scrutiny from them poses some challenges, but in the end we have shareholders, whether they're public or private we have the same obligations and it doesn't change the way we operate the business.
Q: What regulatory changes will you pursue now that fee-for-carriage has been denied?
A: At the [broadcast license renewal] hearings in April we'll be asking for a different set of obligations. The CRTC has an obligation to ensure the system is Canadian and the players in the system are sufficiently financed. It's right there in the Broadcast Act, in Section 3 for what it's worth. If you aren't going to give us the revenue opportunities and take revenue opportunities away from us, then we can't fulfill the cost obligations.
Q: Where would you say you're at in terms of exploiting all the company's content [across different properties]? Can you put a percentage on it?
A: I'd say 20%, this is why I get excited.
There are so many places we just haven't been able to do it. We just haven't got the systems together yet. It's getting better everyday. Just the other day HGTV was on the Vancouver Sun Web site as some sort of gardening thing the Vancouver Sun had. It sent a whole flood of people clicking on the HGTV logo. It's just an example, and I just think that for lots of reasons we haven't gotten there.
Q: What is the priority now?
A: Since March we've been really moving the digital world intoamore seamless universe where content can go on any platform. That's been a huge thing for driving traffic. We're going to announce some things in the next short while that are going to move our traffic numbers up. We've really started to move into local search... metro, local TV, trying to own local community.
Q: How is the media business different in the U.S. than in Canada?
A: We have a larger percentage of our sales from national sales, where as a Gannett or NYTimes or McClatchy--they are regional chains. New York Times has New York and Boston and a few other places but doesn't haveanational sales product they can bring to market. They can't go to an advertiser and say "I'll give you the country."
© Ottawa Citizen
- - -
Q: The stock price is obviously quite low. What story are investors not getting?
A: They're focusing too much on the debt and they're not focusing on the healthy aspects of our businesses. This is a time where, really since June 2007, that's when the credit crunch started and the same company was trading at $8 or $9 a share.
So if you trace it back, it's just a complete paranoia about companies who have debt. Our operating profits were up 13% this year. The underlying businesses that we own are up 13% in this economy and I think that's a huge accomplishment.
Everybody right now is so risk averse and there is still a number of misconceptions out there about the Goldman Sachs deal.
Q: What is the biggest misconception for most people about the Goldman Sachs deal ?
A: The biggest thing that people don't understand, is that they think that Canwest, that's the public company, is going to have to pay Goldman Sachs $1-billion in 2011, and it's just fundamentally wrong... There's never a circumstance in the world, where these guys say 'you guys owe us money.'
Q: In terms of addressing the debt, are you looking at selling assets?
A: I'd say our number one priority is to strengthen the balance sheet. We've taken some small steps, the U.K. radio stuff, closing some community newspapers that were not making money, closing a couple of cable channels, just culling the herd so to speak. So we're looking at any other underperforming assets and saying if there's no path to profitability, lets' get rid of it, let's close it down, let's sell it, whatever. I think the second thing is to really hunker down...there's two ways to improve your balance sheet, one is to reduce the debt, the other is to improve your profits. Just like any company we're focused like hell on the operating costs.
You've seen memos going out to staff in every company right now that Christmas parties are cancelled and travel's curtailed and hiring freezes and job cuts. We're no different than any other company in that regard. In some cases we kind of beat a few to the punch. You saw CTV sent out a memo[Wednesday] and Corus just sent out one [yesterday].
Q: What price, or what options were on the table when you were looking at selling [Australia's]Network TEN [two years ago]?
A: There wasn't really an offer.We received nothing. No formal offer. The price had run up on the announcement we hired an investment banker. If we had at the time sold TEN for half its market value we would have been told we were crazy. We're better to collect the dividends on an asset than sell at half its value. Values are going to come back, and people who are savvy market dealers know that.
Q: What is the nature of Prem Watsa and Fairfax Financial Holdings' investment in Canwest?
A: It's passive, they've been very public about it. It's obviously a huge seal of approval, it's a principal whose managing their own company's money as opposed to fiduciaries who are managing someone else's money. It's a strong statement somebody's taking the risk with their own capital. You can see fund managers have to be a bit more conservative and that's why they're more concerned about debt and have less ability to focus on asset value, strategy and the longer term.
Q: Are you at a disadvantage because your main rival is a private company?
A: It's a disadvantage from a communications standpoint. Because everything we do is so much under a magnifying glass, more under a magnifying glass than we would be if we weren't Canwest and the National Post. The scrutiny from them poses some challenges, but in the end we have shareholders, whether they're public or private we have the same obligations and it doesn't change the way we operate the business.
Q: What regulatory changes will you pursue now that fee-for-carriage has been denied?
A: At the [broadcast license renewal] hearings in April we'll be asking for a different set of obligations. The CRTC has an obligation to ensure the system is Canadian and the players in the system are sufficiently financed. It's right there in the Broadcast Act, in Section 3 for what it's worth. If you aren't going to give us the revenue opportunities and take revenue opportunities away from us, then we can't fulfill the cost obligations.
Q: Where would you say you're at in terms of exploiting all the company's content [across different properties]? Can you put a percentage on it?
A: I'd say 20%, this is why I get excited.
There are so many places we just haven't been able to do it. We just haven't got the systems together yet. It's getting better everyday. Just the other day HGTV was on the Vancouver Sun Web site as some sort of gardening thing the Vancouver Sun had. It sent a whole flood of people clicking on the HGTV logo. It's just an example, and I just think that for lots of reasons we haven't gotten there.
Q: What is the priority now?
A: Since March we've been really moving the digital world intoamore seamless universe where content can go on any platform. That's been a huge thing for driving traffic. We're going to announce some things in the next short while that are going to move our traffic numbers up. We've really started to move into local search... metro, local TV, trying to own local community.
Q: How is the media business different in the U.S. than in Canada?
A: We have a larger percentage of our sales from national sales, where as a Gannett or NYTimes or McClatchy--they are regional chains. New York Times has New York and Boston and a few other places but doesn't haveanational sales product they can bring to market. They can't go to an advertiser and say "I'll give you the country."
© Ottawa Citizen
