CanWest Buying Back Its MediaWorks Income Fund

When a government doesn’t like what it sees as a tax dodge one can usually expect that government to act – it might be slow but it does act. And so is the case in Canada when the government announced last year it was going to tax income trusts.

That gives a problem to CanWest, owner of 11 English language major daily metropolitan newspapers such as the National Post, Montreal Gazette and the Vancouver Sun and other publications and broadcast operations. In September, 2005, it had spun its major metropolitan newspapers into CanWest MediaWorks Income Fund at C$10 a unit, basically offering 26% of the company, at C$10 a unit. The balance of the group is owned by CanWest Global. It would have offered more of the company, but at the time the Canadian government was already showing its displeasure with such funds that it considered little more than corporate income tax dodges, and the authorities had refused to issue a tax ruling prior to the fund’s launch.

Now that such funds are going to be taxed they have rather lost much of their usefulness to their sponsors so CanWest is offering C$9 a unit for a buyout. Before the announcement they were selling on the stock market at C$8.40. 

To help fund that buyout – it had used the fund’s launch revenues to retire debt – CanWest is in the midst of discussions to sell its 56% stake in Australian broadcaster Network 10 which should bring in some C$2 billion or more, but until that is completed the company is borrowing C$1.3 billion via a short-term credit note. - June 1, 2007

Keywords:CanWest,media investment

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