Shaw 2011 Annual Report Download - page 94

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Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2011, 2010 and 2009
[all amounts in thousands of Canadian dollars except share and per share amounts]
On May 3, 2010 the Company announced that it had entered into agreements to acquire
100% of the broadcasting businesses of Canwest Global Communications Corp.
(“Canwest”). The acquisition includes all of the over-the-air channels, which were in
creditor protection, and the specialty television business of Canwest, including Canwest’s
equity interest in CW Investments Co. (“CW Media”), the company that owns the portfolio
of specialty channels acquired from Alliance Atlantis Communications Inc. in 2007.
During 2010, the Company completed certain portions of the acquisition including
acquiring a 49.9% equity interest, a 29.9% voting interest, and an option to acquire an
additional 14.8% equity interest and 3.4% voting interest in CW Media. On October 22,
2010, the CRTC approved the transaction and the Company closed the purchase on
October 27, 2010. Certain of the subsidiary specialty channels continue to have
non-controlling interests. The purpose of the acquisition is to combine programming
content with the Company’s cable and satellite distribution network to create a vertically
integrated entertainment and communications company.
The transaction has been accounted for using the acquisition method and results of
operations have been included commencing October 27, 2010. These broadcasting
businesses have contributed $890,913 of revenue and $251,561 of operating income
before amortization for the period from October 27 to August 31, 2011. If the acquisition
had closed on September 1, 2010, the Media revenue and operating income before
amortization for the year would have been approximately $1,075,000 and $325,000,
respectively. Net income is not determinable due to emergence of certain portions of the
business from bankruptcy protection.
In the current year, acquisition related costs of $60,882 have been expensed and include
amounts incurred to effect the transaction, such as professional fees paid to lawyers and
consultants, as well as restructuring costs to integrate the new businesses and increase
organizational effectiveness for future growth as well as senior leadership reorganization.
As part of the CRTC decision approving the transaction, the Company is required to
contribute approximately $180,000 in new benefits to the Canadian broadcasting system
over the next seven years. Most of this contribution will be used to create new
programming on Canwest services, construct digital transmission towers and provide a
satellite solution for over-the-air viewers whose local television stations do not convert to
digital. The obligation has been recorded in the income statement at fair value, being the
sum of the discounted future net cash flows using a 5.75% discount rate. In addition, the
Company assumed the CRTC benefit obligation from Canwest’s acquisition of Specialty
services in 2007 which was a remaining commitment of approximately $95,000 on
acquisition.
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