Cable TV Firm's Bid For Maclean Hunter Is Down but Not Out

A PROPOSAL by Canada's biggest cable TV company to marry its operations with the country's largest publisher is turning into a hostile prenuptial spat that could sink the ceremony.

Maclean Hunter Ltd., Canada's oldest and biggest publisher, formally rejected a $2.9 billion (Canadian; US$2.1 billion) buyout offer from Rogers Communications Inc. Feb. 24, saying the bid was not enough.

The rejection does not spell the end of the deal. Nor does it necessarily mean that Rogers will not ultimately succeed in its buyout attempt. Many analysts interpret Maclean Hunter's move as a bid to drive up the price.

But officers at Maclean Hunter are clearly unhappy with the Rogers' bid and have been seeking other suitors. Tax and regulatory developments since the announcement a month ago have also changed key financial parameters, making the outcome less certain, analysts say. Nevertheless, the Rogers offer is on the table until March 15, and some analysts say something is bound to happen. ``I think a deal is still very likely. These are just negotiating tactics, that's all,'' says Peter Legault, communications analyst with Toronto-based Kernaghan & Co. Ltd.

If the two companies merge, it would create a Canadian cable-publishing powerhouse that would reach one-third of Canada's 7.2 million cable TV subscribers. Rogers leads the pack with 1.8 million cable subscribers. It also owns a 70-store video rental chain, 11 AM and five FM radio stations, and 80 percent of a cellular phone service with 500,000 subscribers.

Maclean Hunter, which is 103 years old, publishes nearly 200 periodicals in 10 countries and is the country's fourth-largest cable TV company with 690,000 subscribers in Ontario. It has another 534,000 subscribers in its United States-based cable systems in New Jersey, Detroit, and Florida. It owns one TV station and 21 radio stations across Canada.

The driving force behind the merger bid is E. S. (Ted) Rogers, chief of Rogers Communications, a daring entrepreneur who, while still a university student, launched Canada's first FM radio station. He dove into cable in the 1960s, piloting his company to $1.15 billion in sales in 1992. Rogers went public in 1979, but has yet to turn a profit. ``All the company has to do to make money is stop growing,'' Mr. Rogers told a columnist at Maclean's magazine -

the national weekly owned by the company he would like to purchase.

With visions of a Canadian electronic information superhighway dancing in his head, Rogers says Canada needs size to compete with huge US cable-telecommunications conglomerates like Time Warner. ``If we are to maintain a distinctive Canadian voice ... it is essential to build companies of comparable scale and sophistication,'' he said at a Feb. 2 press conference announcing his bid.

Rogers's bid was affected somewhat last month when US regulators announced a 7 percent rate cut for US cable companies. Rogers had hoped to repay $2 billion borrowed from Canadian banks for the buyout by selling Maclean Hunter's US cable systems for $1.5 billion. The US cable rate rollback cuts the value of that sale by 10 to 15 percent, some analysts say.

There are also concerns that the federal government could block or unwind any merger it does not like. The Canadian Radio and Television Commission, which must pass on such a deal, will weigh any potential adverse effect on subscribers. And the federal Bureau of Competition Policy also must assess whether the merger would create a monopoly.