Friday, February 20, 2009

Taps for the Aspers

Lenny Asper is furiously scrounging for financial help for Canwest, but the price of saving the company may, in fact, be the removal of the Aspers themselves, according to this Globe and Mail piece. Time is short: bankruptcy beckons, perhaps in March.
As I said in 2006, a recession would make this company ripe for take-over, break-up and asset stripping. Prem Watsa and his Fairfax Financial want to do exactly that. They hold a large minority interest in the company. Watsa is the only large Canwest shareholder who's solvent, so he gets to call the shots. The creditors are worried they'll take a big hit on Canwest's high-interest, low-grade debt of nearly $4 billion.
In the past two weeks, some two million shares have changed hands. For most companies, that much extra trading would likely drive up the stock, but, in fact, it's fallen, then bounced back a little bit (and now tanked. See update below). The market thinks this company's dead, like Nortel. I'm not so sure. I'd bet on Fairfax's ability to come out with something after the Aspers are gone, the company is split up, the convergence model is ditched, and the various assets are sold.
The specialty channels are Canwest's jewels, despite the fact most of them are extremely poorly -- and obviously very cheaply -- programmed. Now, who wants to buy a newspaper chain and a TV network? That's the tricky part. The smart thing would be for the new owners to hang on through the recession, install new managers throughout the entire organization (the genesis of the troubles, in my opinion), and sell them when they show a profit.
Which they will, when papers are no longer run like TV stations, and TV stations are run with some intelligence.
The other scenario -- which, I think, is far less likely -- is for Asper to shake up senior management, bring in a restructuring expert, close money-losing operations and fix the rest of the organization.
That was the 2007 solution. We're way past that now.

The stock is trading at 36 cents at 11 a.m. Friday, Feb. 20. That's just a couple of cents above the all-time low of 34 cents, set last November. At Christmas, Canwest flirted with 90 cents before re-starting its track downward.
The market is stating its opinion very clearly.


The Globe now says the vultures are not only circling, they've also come up with serious plans for the carcass.
The stock hit an all-time low of 31 cents today.
This afternoon, I sat in on a Montreal Gazette news management meeting. It was such a contrast to the corporate mess. Here were skilled, dedicated, honest and extremely professional people planning Saturday's paper. These are some of the people who are at risk because of this mess, and I hope they come out of this with their jobs and their paper intact. Canwest's problems were not made in the newsroom, but in the boardroom. Yet, it's the journalists who have suffered the most and who seem to have the most concern about the future.

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