Jacquie McNish and Paul Waldie
From Saturday's Globe and Mail Published on Saturday, Sep. 11, 2010 1:17AM EDT Last updated on Sunday, Sep. 12, 2010 10:56AM EDT
On an evening bus ride from Whistler to Vancouver during the February Olympics, George Cope got new-media religion.
Stuck in traffic and surrounded by his sleeping children, the Chief Executive Officer of BCE Inc. watched the entire women’s gold-medal hockey game from his cell phone. Mr. Cope recalls thinking: “The world has changed.”
Millions of Canadians, he realized, were turning to a new generation of graphic-friendly mobile devices, BlackBerries, iPhones, smart phones and lap tops, to download media content. In the long lineups at the Olympic game, he saw crowds of spectators sharing cell phones to download television broadcasts, scan Internet news and dispatch text messages to keep up with sports news.
“The penny dropped at the Olympics,” Mr. Cope said. “The Olympics was a real important moment because it was really the first time we started to see these new technologies.”
That epiphany was the first step down a path that led to months of intense negotiations over the future of Canada’s biggest private television network, CTV Inc. Those talks, which hinged on repairing frayed relations between BCE and the Thomson family, culminated Friday in BCE’s $1.3 billion-deal to buy the 85-per-cent share of CTV Inc. that it didn’t already own.
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As part of the agreement, CTV’s media partner, The Globe and Mail, will be hived off and controlled by Woodbridge Co. Ltd., which is owned by the Thomson family. BCE will retain a 15-per-cent stake in the newspaper.
Mr. Cope’s strategic ambition was up against the intricate and sometimes fractious ownership structure of CTV, which dates back 10 years to when BCE made its first foray into media by acquiring control of CTV and The Globe and Mail with the partnership of the Thomson family.
BCE’s initial promise to deliver a new digital media model never materialized, and that failure created an atmosphere of mistrust that Mr. Cope, who became CEO of the telecommunications giant in 2008, would need to repair in order to do a deal.
“I guess I can be frank,” David Thomson, Woodbridge’s chairman said Friday, “Over the last years we’d suffered from an atmosphere of mistrust and there has been a separation of states.”
Mr. Thomson and Geoff Beattie, Woodbridge’s president, discussed the future of their CTV holding and of The Globe earlier this year, when they went through their annual exercise of looking at the company’s long-term future. “David and I had a conversation after Christmas,” said Mr. Beattie, in which it became clearer that “we had to take control” of The Globe.
BCE also set changes in motion. Mr. Beattie said relations between Woodbridge and BCE began to improve shortly after the Olympics when it became apparent that the company had renewed interest in media properties. One of the first signs of BCE’s change of heart came from Siim A. Vanaselja, BCE’s chief financial officer who was also on the board of directors of CTVglobemedia.
“He started asking a lot of questions about the business” after the Olympics, said one person close to the board.
Mr. Beattie said he and Mr. Thomson opened negotiations in April with Mr. Cope, who made it clear from the outset that he was seeking full control of CTV. By then, sources said the Ontario Teachers’ Pension Plan and Torstar Corp., which had largely been passive minority investors, indicated an interest is selling their stakes.
Sources familiar with the discussions said the sale was largely negotiated by Mr. Beattie and BCE’s Mr. Vanaselja. It is understood the talks bogged down for several weeks over the value of CTV, which was recovering after a slump in advertising revenue in 2009.
“Geoff and I and David and the crew have been at it for four or five months. In this beautiful summer weather we were able to do nothing but work on this transaction and see if we could put it together,” Mr. Cope said.
People familiar with the talks said that a deal was close to being struck in early August, but talks stalled after the sudden departure of one of CTV’s key executives, Keith Pelley. Mr. Pelley, 46, was CTV’s executive vice-president of strategic planning, who oversaw the consortium that broadcast the Vancouver Olympics.
The executive was widely regarded as the successor to CTV’s long-reigning president and CEO Ivan Fecan and Mr. Pelley’s defection to a senior media post at Rogers Communications Inc. was regarded by BCE officials as a blow to their acquisition plans. Mr. Fecan announced Friday that he plans to retire when the BCE deal closes.
One source familiar with the negotiations said talks resumed in early September and after some parrying about valuation, the companies reached an understanding within a couple of weeks.
Mr. Thomson hinted that Woodbridge could deepen its ties with BCE if the telecommunications company commits to more strategic collaboration in new-media ventures with Woodbridge’s large stable of media assets, which include the global business news service Thomson Reuters.
Mr. Thomson said tensions between the two companies have left them wary about the potential future partnerships.
“We’re rather more attenuated. There are raw nerve endings,” he said.