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Decision
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Ottawa, 22 April 1988
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Decision CRTC 88-295
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Leader Broadcasting Corporation Limited
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Thunder Bay, Ontario - 872920400
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Following a Public Hearing in Toronto on 1 February 1988, the Commission approves the application for authority to transfer effective control of Leader Broadcasting Corporation Limited (Leader), licensee of CJLB Thunder Bay, through the transfer of 450 common shares from the existing shareholders to NewCap Broadcasting Limited (NewCap). As a result of this approval, NewCap will acquire 100% control of the licensee company.
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At the hearing, Leader explained that the shareholders' decision to sell to NewCap was based on operational difficulties related to the illness and death of Mr. Ray Erickson, CJLB's General Manager. While offers from other prospective buyers had been considered, the applicant explained at the hearing that NewCap was unique in its commitment to maintain and improve Leader's record of community service. It also expressed confidence that NewCap would "be a leader of development of Canadian talent to northwestern Ontario".
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NewCap is the licensee of CFDR and CFRQ-FM Dartmouth and a wholly-owned subsidiary of Newfoundland Capital Corporation Limited (Newfoundland Capital). Accordingly, Newfoundland Capital, through NewCap, will control the licensee. While the parent company's holdings are primarily in the transportation sector, it has expanded into the broadcasting field in recent years, acquiring effective control of Northumberland Broadcasting Company Limited, licensee of CHTN Charlottetown, in March 1986 and the assets of CFDR and CFRQ-FM a year later. The assets of these Dartmouth stations were subsequently transferred to NewCap pursuant to Decision CRTC 87-860 dated 28 October 1987.
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The Commission notes that the proposed purchase price is $2.4 million, to be drawn from cash held on deposit by NewCap, and it has no concerns with respect to the availability and adequacy of the required financing.
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As stated in a number of decisions relating to applications for authority to transfer effective control of broadcasting undertakings, and because the Commission does not solicit applications for such transfers, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
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The Commission reaffirms that the first test any applicant must meet is that the proposed transfer of ownership or control yields significant and unequivocal benefits to the communities served by the broadcasting undertakings and to the Canadian broadcasting system as a whole, and that it is in the public interest.
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In particular, the Commission must be satisfied that the benefits, both those that can be quantified in monetary terms and others which may not easily be measurable in terms of their dollar value, are commensurate with the size of the transaction and that they take into account the responsibilities to be assumed, the characteristics and viability of the broadcasting undertakings in question, and the scale of programming, management, financial and technical resources available to the purchaser.
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In its application and at the hearing, NewCap contended that it could contribute to the Canadian broadcasting system as a new participant in broadcasting outside of the Maritimes and by using its solid central management and healthy financial resources to build a strong station. In this regard it noted that Leader's financial viability would be improved with the approval of this application and that the licensee would immediately become debt-free.
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NewCap proposed to maintain community involvement and local input to CJLB by ensuring that a majority of Leader's Board of Directors and of the station's staff are local residents and by continuing the station's community advisory board, which is to have a rotational membership. Moreover, as part of the purchase agreement, Mr. McIntyre has agreed to remain on contract to work at the community level on Canadian talent development and other special projects. NewCap also indicated that, while the station's Contemporary MOR format would be maintained, new management expertise would contribute to the professionalism of on-air staff. The Commission notes as well that NewCap proposed to strengthen and expand local news coverage with the addition of a news stringer to cover stories relevant to the additional 8,000 to 10,000 people to be served by the Nipigon/ Red Rock retransmitter which was authorized in Decision CRTC 86-1137 dated 27 November 1986.
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With respect to those benefits that can be quantified in monetary terms, NewCap plans to increase Leader's annual Canadian talent budget from the current level of $30,500 to a minimum of $85,000 over five years. Of this, an annual budget of $15,000 has been allocated to a new country music talent search, to be known as Top Card, and $2,000 per year to FACTOR/CTL. At the hearing, NewCap stated that "both TopCard and FACTOR/ CTL contributions will be increased in proportion to CJLB revenues every year".
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NewCap has also allocated $200,000 for capital improvements to be undertaken in the 18 months following approval of the application, including $48,000 for a new production facility, $40,000 for improvements to the master control room, $33,000 to upgrade CJLB's newsroom facilities, $10,000 for the introduction of a computerized music system, $35,000 for leasehold improvements and $25,000 for completion of the Nipigon rebroadcaster. An additional $10,000 in the first year of ownership was earmarked for an audience research study and $3,000 in each of the next four years for yearly updates of the study. NewCap also proposed to maintain the station's ties with Thunder Bay's Confederation College, doubling CJLB's annual broadcasting scholarship to $1,000.
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When applying the benefits test, the Commission takes into account only benefits which would not be realized without the proposed transfer. In this case, the Commission regards the commitment for the completion of the Nipigon rebroadcaster as an existing obligation and therefore has not considered it as a benefit in the context of this application.
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The Commission has given particular consideration to the financial resources and management expertise available to NewCap, along with its commitment to local representation, which will enable it to maintain and strengthen CJLB's viability and quality of service. The Commission is satisfied that NewCap has demonstrated that the proposed transaction will yield significant and unequivocal benefits to the communities served and to the Canadian broadcasting system and that these benefits are commensurate with the size and nature of the transaction. Accordingly, the Commission has concluded that approval of the application is in the public interest.
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At the hearing, the Commission discussed the ownership structure of Newfoundland Capital and, specifically, the degree of ownership of its shares by non-Canadians insofar as it could affect the licensee's compliance with the Direction to the CRTC (Eligible Canadian Corporations). The licensee undertook to provide further information on this matter within two weeks of the public hearing and subsequently filed a report with the Commission which has been placed on the public file for this application.
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The Commission reminds Leader that the licensee must ensure compliance with the Direction. It therefore expects the licensee to take all necessary steps to ascertain that it complies with the requirements of the Direction. At the time of CJLB's next licence renewal, the licensee will be required to provide the Commission with adequate information to demonstrate its compliance.
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Furthermore, in the interest of diversity of radio service in the Thunder Bay market, the Commission will wish to be informed of the results of the proposed audience research study prior to any contemplated change in the station's format.
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The Commission acknowledges the twelve interventions in support of this application.
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Fernand Bélisle
Secretary General
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