Inside Leonard Asper’s private struggle to save one of Canada’s most influential companies

Crisis Lines, Part 1: Inside Leonard Asper’s private struggle to save one of Canada’s most influential companies

Theresa Tedesco | 05/11/13 | Last Updated: 05/11/13 5:38 PM ET
I don’t know whether our escape comes from Egypt, Australia, Mexico, Europe or the corner of Jarvis and Bloor

An exclusive look at Leonard Asper’s losing battle to keep control of the Canwest family dynasty as revealed in his extensive business journals. This is the first in a three-part series.

On a cold Winnipeg morning in December 2009, Leonard Asper, the youthful scion of a family media empire stood at the grave of the patriarch for the first time since his father died suddenly six years earlier. It had been two months since the Asper family’s control of Canwest Global Communications Corp. had been stripped away after the once-mighty media conglomerate sought court protection from its creditors. “After having trouble finding him, I stood and cried, said I was sorry, left a loonie there and pledged to build another mighty oak from that acorn,” Leonard wrote in his business journal later that day. “Then I cried for 30 seconds more in my car, stopped and moved on. I had never visited the cemetery prior to that.”Few predicted the downfall of the high-profile Western Canadian family at the time of Israel “Izzy” Asper’s funeral in October 2003. The youngest of Izzy’s three children, Leonard had already become chief executive of Canwest in 1999, part of a succession plan that saw his father step away from the day-to-day operations of the media behemoth he founded in 1974. The family controlled the largest media company in Canada with a newspaper chain of 13 dailies, including the National Post, as well as the Global Television network, specialty television channels, radio and broadcasting operations in Australia, New Zealand and Ireland. Leonard and his two siblings, David and Gail, served notice they intended to carry the family torch when they eulogized their hard-driving father. “We have your checklist. We know what’s left to be done, and we will not let you down,” Leonard told a packed congregation at Shaarey Dedek Synagogue in Winnipeg.

But they did. Today, the empire that Izzy built with a mountain of debt is a painful memory for the Asper siblings, especially 49-year-old Leonard, who at times fought a lonely battle to keep it in the family’s hands. Overwhelmed by $3.7-billion in debt and a worsening economic climate spurred by the catastrophic collapse of Lehman Brothers, the fourth-largest investment bank in the United States, Canwest eventually but voluntarily sought court protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA).

Looking for ‘a diamond in all the pile of manure we are in’

It was an ignominious end for the Winnipeg family after an intense two-year war with Canwest’s blue-chip board of directors, the company’s creditors, led by Bank of Nova Scotia but including all of Canada’s major banks, and an army of professional advisors. A long list of players from almost every corner of Canada’s business establishment stepped into the drama, as well as a former prime minister, two former premiers, the Rogers, Shaw, and Peladeau families that control Canada’s media dynasties, a bevy of well-known law firms, investment bankers and a handful of aggressive U.S. hedge funds.

Leonard’s private struggles for survival were written down in a series of business journals he kept at the suggestion of a friend. Though never meant to be kept for posterity or to be published, Financial Post was given access to the extensive writings after more than a year of repeated requests. They reveal a rare peek at an embattled CEO who wrote daily in real time, often in a series of raw, rambling and emotionally-wrought entries at the end of a bruising day as he fought a losing battle to keep control of the family dynasty as well as the respect of his siblings and the business community. This is Leonard Asper’s story as much as it is about the dismantling of one of Canada’s biggest and most influential companies.

Fall 2008: FAMILY DOUBTS

Global markets are shuddering and credit lines tightening in the wake of the financial meltdown in the U.S., but Canwest in September manages to secure a lifeline to pay off some of its crushing debt, accumulated mostly under Izzy Asper’s tutelage to acquire a newspaper chain from Hollinger Inc. at the peak market price of $3.2 billion in 2001. After numerous failed attempts, the company finally has a deal to sell its 523 million shares in TEN Networks Holdings Ltd. to a consortium led by a large Australian financial institution. The transaction, dubbed Project Pearl, is for $2.15 per share, or approximately $1.1 billion. However, Lehman Brothers dies two weeks later, and so does Canwest’s deal to sell its Australian television interests. Making matters worse is that advertising markets, especially in print, are drying up as economies tank worldwide. Canwest’s towering debt looms ever more ominous.

Inevitably, Leonard Asper, who never fancied himself a media baron, goes cap in hand to the bank towers in downtown Toronto seeking “covenant relaxation” from the senior lenders of Canwest Media Inc. (CMI), the parent company that owns most of the broadcast assets. The country’s largest banks, led by Bank of Nova Scotia, cut the company slack, levy a penalty and bump up the rates on its interest payments. Meanwhile, bond rating agencies in Canada and the U.S. watch closely, reassessing their risk ratings to reflect the increased probability that Canwest will default on its obligations. Equally worrisome for the Aspers, who control Canwest with 47.6% of the company’s multiple voting shares, is the stock’s 18-month spiral to less than $1.50 from $15 in mid-2006. By mid-October, Leonard is on the defensive about Canwest’s worsening operating condition, not just with industry analysts, creditors and investors, but also with his 73-year-old mother, Ruth.

“Today started with a visit to Mom, who started in right away with our current situation and obviously David had gone around to her bad mouthing me as well, so I spent 30-40 minutes defending myself again,” Leonard writes in a journal entry. A similar scene plays out when he meets with his sister Gail, the company’s corporate secretary. The siblings have “a fairly difficult conversation with me again having to convince her we were not going bankrupt, had to defend my record, and she wanted specifics about how we were going to get out of this massively depressed value situation. I told her there was no easy fix… while it was cordial, it was not a pleasant discussion… I came away feeling it is entirely possible she could gang up with David and turf me. No matter what I say, she just says look at the share price. The whole world’s on fire as this is the worst financial crisis since 1929 and she is acting like this is isolated to Canwest.”

In mid-November, the deteriorating financial situation worsens. It becomes apparent the company could default on millions of dollars in interest payments to its lenders, which now also include a handful of U.S. hedge funds that have begun quietly buying junior debt at the parent company. Canwest takes a massive $1-billion fourth-quarter writedown, while DBRS Ratings Ltd. lowers the company’s risk rating to “highly speculative,” warning Canwest is heading toward a “negative free cash flow position” by the end of 2009.

“I fear the only situation is issue equity and pay down debt or swap debt for equity,” Leonard acknowledges in a journal entry. “I am still pushing asset sales but no one offering big prices as of yet. We can only cut costs so much.” He adds the situation may require a more drastic solution, including “a total rewrite of the Global/TV business model.”

With Canwest struggling as a going concern, Leonard seeks to secure another financial lifeline, hiring RBC Capital Markets to advise the company and help find $300 million to $600 million of new equity. Leonard nervously watches as the company’s debt bonds trade at 30¢ while the stock is at 60¢. Wall Street hedge funds smell blood and are furiously buying at deep discounts. Still, Leonard continues to only see opportunity.

“Despite all the shit we are in, this could be a time to seriously capitalize on the fear. If we can do that, and survive, greed will surely return to the world and we may emerge with less debt, even if some dilution, and a healthier stock price… If these were different times and we’d had a better balance sheet our company would be worth billions again and I’d be a goddamn visionary — we are ahead of every other media company in North America in so many ways but it’s all been smothered.”

Even so, Leonard is encouraged that Canwest’s board, led by Derek Burney — a former Canadian ambassador to the U.S. and a seasoned veteran of corporate boards whom the Asper family appointed to replace Izzy as chairman — is “calm and resolute that we are on the right track and we just need to stay the course even as we batten down the hatches.” But the end of 2008 signals more red flags ahead. Canwest’s market capitalization is down to $366 million, and it has a $3.7-billion debt. If earnings continue to slump, it’s only a matter of time before the company runs afoul of its loan covenants.

“I just have no idea how this year will go,” Leonard writes. “Despite all the good things, like our success in digital media, cost containment, etc., this massive ad spending paralysis and our still too high debt continue to overshadow everything else and I think that my own personal stock not being very high right now is weighing on me. I need to come out on top this year in business. Period.”

WINTER 2009: Going Down Rabbit Holes

With advertising revenue down 20%, Leonard Asper and his senior management team realize the company’s publishing unit — Canwest Limited Partnership (LP) — will likely not meet the EBITDA (earnings before interest payments, tax, depreciation, and amortization) ratios to debt for the third quarter as set out in the subsidiary’s senior bank loan agreements. Fearing LP’s operational profitability is not sufficient to keep its $900-million loan covenants onside, Leonard instructs his senior management team to keep crunching numbers as he heads to Orlando, Fla, with his wife, Susan, in late January to attend the NFL Super Bowl as a guest of U.S. television network NBC. But on the eve of the game, Leonard learns the numbers won’t work and he rushes back to Toronto for an emergency board meeting the next morning. The banks are notified of the potential covenant breach and, because the debt is publicly traded, Canwest’s lawyers advise the company to issue a public statement. While watching the Super Bowl game alone in the basement of his Toronto home, Leonard works on the sensitive wording of the release as his favourite team, the Pittsburgh Steelers, prevails in an exciting game.

During the next few days, Leonard again appeals to the banks for clemency, which is granted, only this time with a condition: Cash cannot leave LP in the form of dividends to the parent company. Instead, any free cash generated must be preserved to pay down the massive debt. In other words, the Canadian banks as senior debt holders forbid Canwest from paying out to anyone below them in the pecking order of creditors. Leonard is surprised. The worst he expected was that dividends would be squeezed, not shut off altogether.

“So we are madly scrambling to save every dime where we can in order to get the publishing group back on side while pleading with the banks for time,” Leonard writes. Meanwhile, at a meeting with Rick Waugh, CEO and president of Bank of Nova Scotia, a long-time banker to the Asper family, Leonard gets mixed messages. “BNS appears to be playing hardball, even though Rick said ‘we’ll support you.’” At the time, Scotiabank led a syndicate of Canwest’s secured creditors, which included all of Canada’s five major banks. A call to RBC CEO Gordon Nixon yields a similar assurance. “We’ll see,” Leonard notes.

However, the reprieve also creates a more imminent problem: Without cash flowing to the parent from LP, CMI will not be able to meet its $30-million interest payment to junior debt holders on March 15. In early February, as hedge funds continue to accumulate Canwest debt, Leonard reaches out to several potential financial white knights, including Prem Watsa, founder, chairman and CEO of Fairfax Financial Holdings Ltd., and Canwest’s second-largest shareholder with a 22.41% stake. Watsa advises Leonard he “would have to give up control.” Asper also seeks help from Frank McKenna, a former Canwest director and, more importantly, vice-chair of Toronto-Dominion Bank, hoping Canada’s second-largest bank will “step up and take the whole credit.” But the former New Brunswick premier demurs, telling Leonard the bank is “dialing down corporate lending. BNS is the leader there so we have to ride with them.”

There are also visits to Gerry Schwartz at Onex Corp., Bruce Flatt, CEO of Brookfield Asset Management Inc., Tony Lacavera, chairman and CEO of Globalive Communications Corp., which owns wireless carrier Wind Mobile, and billionaire financier Ned Goodman, CEO of Dundee Corp. Overtures are also made to associates of Carlos Slim, the Mexican billionaire and one of the richest men in the world, large European private trusts and even flamboyant Australian media baron Rupert Murdoch. “I wanted to go down every path, rabbit hole, etc. to make sure we had explored everything,” Leonard writes.

Desperate and determined, Canwest’s CEO scrambles to cobble together a restructuring deal to save his family’s business, its fortune and its public face. “We are trying to get banks to give us time to raise equity or otherwise recapitalize the balance sheet. We have to find the equity on the basis, preferably, that leaves us in control so we don’t suffer the humiliation of losing the company,” Leonard writes.

Issuing more Canwest shares is an option — just not an attractive one. “Ideally we simply position this (which is the truth) as a company issuing equity to right size its balance sheet like most companies without controlling shareholders do. The flaw of course is that we are trying to raise equity in the worst possible market conditions. So the battle is how to raise equity at the least dilutive price from patient money that won’t want to take over the company.”

To make that happen, the Asper siblings are willing to put up $50 million, but they need at least that much more or even double that from other partners to get to safer ground. “If we could find an unconventional lender who will give us $200 million plus to pay the bond interest, we would be fine. We just need someone who will let us live in covenant breach for two years. So that becomes the mission.”

Although he’s publicly criticized for Canwest’s debt load and for not having done enough to prepare the company for a cataclysmic event, Leonard privately blames his father. “This mess is Izzy’s and everyone knows it, and this doesn’t reflect on me,” he writes, struggling to put the unfolding corporate crisis into perspective. “Nonetheless, I have to do what is right for the company, and to end up with something. I have to be mentally prepared to give up control while fighting like hell to keep it.”

In Leonard’s mind, the banks are culpable too; they turned off the taps and refused to give the family time to turn the company around. “Our businesses are the best run in the industry… I’ve done a fucking good job,” Leonard notes. “I didn’t realize how badly the Hollinger deal was financed. I think between Izzy’s aiming for the pinnacle and no one there to stop him, we should have used more equity but no one came up with that. Lesson learned. I just hope when this is over people see we’ve run a good ship especially given the asset base we have.”

In the meantime, he plays for time. “The hard part is not knowing how the damn play ends. My unbridled optimism tells me that I will prevail and while it is not easy to see how we end up at the same wealth level, I believe the company can be recapitalized and can grow with the right investment levels. There are so many moving parts — the senior debt, the junior debt, the siblings, the senior management, the investment bank RBC, the board. They each have their own agendas,” he laments.

Although his business skills are being sorely tested, Leonard observes “my acting skills are being challenged even more.” For one, he resents “having to tell everyone that the damn company was not closing the fucking doors today” every time an extension deadline came and went. “If only they knew what was really going on. If we weren’t public they would not know anything and neither would our suppliers. If we weren’t a public company none of this shit would be happening, we would be quietly renegotiating loans behind closed doors,” he writes in March. “The only frustrating thing is the time I am spending calming everyone else down… and I am frustrated by the reputation hit.”

 SPRING 2009: Evil Knights, Dragons and Trap Doors

March 15 comes and goes without an interest payment by CMI to the junior debt holders. A 30-day cure period ensues to allow the company to get back onside its loan covenants. But nothing changes by mid-April and CMI is officially in default. The bondholders move in and start making their presence known. Rather than foreclose on the company, the new players, including Toronto-based West Face Capital and Golden Tree Asset Management LP in New York, take a seat at the board table and create a special committee to oversee the corporate overhaul.

As the dance to secure further extensions continues in April, Leonard manically scours every corner of Bay Street for a partner. A sympathetic gesture is extended from Edward Rogers Jr., son of the late Ted Rogers and deputy chairman of Rogers Communications Inc., who sends notice to Leonard that he is willing to explore a $20-million investment in Canwest, prompting Leonard to sarcastically note, “So as of now, I don’t know whether our escape comes from Egypt, Australia, Mexico, Europe or the corner of Jarvis and Bloor.”

More loan problems surface in May when CMI is scheduled to refinance about $100 million in senior debt due in June. Scotiabank makes a proposal to provide the refinancing, but its terms are considered more expensive and more onerous by Canwest’s board. The group of hedge funds steps forward with their own refinancing pitch. The board accepts the friendlier terms from the bondholders, who replace Scotiabank as senior lender, a crucial move Leonard later regrets. “It was a fatal mistake,” he recalls. “The only creditors of the parent company were bonds and their sole interest was to wipe out shareholders.” The bondholders, who now own most of the senior and junior debt, and Canwest’s beleaguered board steer the company toward a court-protected restructuring. Meanwhile, Leonard’s son, Matthew, asks why his father is rarely home. “I told him my lemonade stand wasn’t doing very well and I have to fix it,” repeating the words Izzy consoled him with in 1970 when a young Leonard asked the same question.

Leonard’s days are actually daily marathons of meetings with his advisors Chuck Winograd, a Bay Street veteran and former CEO of RBC Capital Markets, Jon Levin, a corporate lawyer and partner at Fasken Martineau DuMoulin LLP, and Patrick Blott, founder of Blott Asset Management LLC in New York, as well as with his siblings, senior management, Burney and Hap Stephens, who had been hired as chief restructuring officer for CMI at the behest of the lenders.

“This would all be so horrible except one reminds oneself and the directors remind me, that many, many companies are going through this car wash, and this is the worst business crisis in 70 years,” he writes. Even his mother stops giving him grief. Still, he cringes when he reads media reports that describe him as a defeated man. “This is all very sad,” Leonard notes in mid-April. “I’ve worked my ass off for 10 years, been $4 billion in debt the whole time, worked for the banks and have $1 billion of wealth. Any business person will tell you that cycles come and go. My CEO career has just been on an up cycle, debt notwithstanding. A lot of my colleagues 10 years older and more are quite used to being worth $500 million to zero, then $500 million again. There is still $1 billion of value here because the assets make a shitload of money. But can you/one get to the room in which it is locked, getting by evil knights, sentries, dragons and trap doors alive and still holding the key?”

The possibility of a CCAA filing continues to become more of a reality. During one of the numerous Asper family meetings, they debate whether to fight for only one of the assets, “and walk off the scene,” Leonard writes on April 29. “Rick Waugh said to me ‘pick one’ referring to TV or newspapers, ‘because in the end you probably won’t be able to control both.’” The other option is to team up with Fairfax, because “we all agreed this is the deal to do and probably the only deal that can stop a filing.”

But Prem Watsa insists on control because he argues the only way to get their deal approved by the bondholders is to install new faces. “People don’t want the same guys to control the company who got it into trouble in the first place,” Leonard recalls the CEO of Fairfax telling him. “It’s not fair; it’s not right but it’s just the way it is in the new world of restructuring.” That means the Aspers have to step aside, reduce their controlling stake by 20%, and allow Watsa’s new team, led by media executive Michael MacMillan, former executive chairman of Alliance Atlantis, to operate the company. Although Leonard views the Fairfax offer as “odious,” the family accepts. “Today we bought ourselves a completely new lease on life and snatched (partial) victory from the jaws of defeat,” he notes, trying to be positive.

The three Asper siblings finalize the transaction on May 4 at Fairfax’s head office in downtown Toronto. “Even though I don’t think this was my fault, I am sorry,” Leonard says to his siblings as they ride the escalator down to the lobby. “They didn’t really respond, but it wasn’t in a negative or positive atmosphere, it was more of a ‘we are where we are’ silence.” Still, “Gail surprisingly gave me a hug, David was more in ‘let’s move on’ mode, as was I.” Later, Leonard debriefs his mother, who consoles him by saying, “The people who really matter know what happened, most people won’t know anything, and the people who will bad mouth us/me have been doing that to the Aspers for 20 years.”

But the bondholders veto the Fairfax deal, as they do similar proposals championed by the Aspers. Leonard complains to chairman Burney about “a McCarthyist approach to anyone who supported an Asper position,” while he fumes at the “arrogance” of some of the advisors hired by Canwest. More deadlines come and more extensions are granted, but it’s apparent a CCAA filing is inevitable. The only question is whether it will be a joint filing of the broadcast and publishing units or separate ones. “So once again, we are alive,” Leonard writes about all the extensions. “Filing in the morning, an extension by the end of the day. Which do you believe? Who the fuck knows!”

In June, after a bevy of potential partnerships fail to win favour with the bondholders, the Aspers begin negotiating directly with them. Steven Shapiro, founding partner of Golden Tree, calls Leonard and during a lengthy conversation he repeats “that he had no interest in being a Canadian media baron, he just wanted to ensure value,” Leonard recalls. “Whatever.”

Leonard and Winograd fly to Manhattan to meet with Golden Tree, and Leonard braces himself for the 3 p.m. meeting by eating a thick, lean corned beef sandwich with spicy mustard. “How’d the meeting go?” Leonard later writes. “Golden Tree was prepared to give us big upside on the new money and the control premium which means we might get decent economics if we are creative.” Even so, the Aspers still prefer to partner with a new equity player that can help them buy out the bondholders and start over. On his return flight home later that day, Leonard notes it’s time for “a little Jewish chutzpah” and “enough of the WASPY look-out-for-my-golf-club friends play it by the book attitude.”

To that end, he spends time “intelligence gathering and ally building” while attending public functions because it is “good to be seen and seen to be good.” The goal when dealing with the Street, he writes, is to “appear confident and strong by striking the right balance between optimism and acknowledgement of the gravity of the situation.”

Golden Tree returns with a revised proposal in late June. Under the new terms, the Aspers don’t receive any new equity in the restructured company, although they can buy some at a later time. The Aspers had hoped for 20% of CMI and a first-offer right on Golden Tree’s 80% of the company.

SUMMER, 2009: Looking for a Diamond in a Pile of Manure

On Canada Day, the Aspers are reminded that any deal with the U.S. bondholders will yield them little, if any, new equity in the restructured company. “They are really focused on not giving old equity anything,” Leonard writes.

The inexorable march to the CCAA courts seems unstoppable with the battle lines dividing the company’s boardroom: The Aspers on one side; the directors, creditors and professional advisors on the other. Leonard notes how he and Canwest’s chairman Burney communicate by “yelling.” At this time, the Aspers try to revamp the board. Leonard laments that whenever he tries to gird his fellow directors to stand up to the aggressive bondholders, he gets little traction. “There is very little fight left in them or to the extent there is, they are prisoners of the advisors who clearly want this over — the lawyers get paid big fees in a filing and no doubt RBC wants their fees by Oct. 31 year end so they get their bonuses. I am the one with the most at stake so I am the one that will continue to fight the hardest.”

More bickering over the timing of a CCAA filing yields a possible deadline between Aug. 10 and 12. But Leonard balks. “Not on Dad’s birthday [Aug. 11] that is for sure.”

Despite having made little progress, draft proposals for a recapitalization plan between the Aspers and the group of bondholders continue to fly. At a fundraising event with federal Finance Minister Jim Flaherty in early August, Leonard asks a government official why Air Canada “got bailout money and not Canwest? He gave me the national interest speech but I can’t see the difference,” he writes.

For the next several weeks, the ground continues to shift as Leonard scrambles to find millions to recapitalize the company, protect the dwindling Asper equity or at least secure a three-year cash-out of the company for the three siblings. In his inimitable way, Leonard describes the process as looking for “a diamond in all the pile of manure we are in.”

According to Leonard, he has lost $275 million of his Canwest holdings dating back to June 2007. “The fucking magnitude is mind-boggling. That’s only my share. Gail and David have lost that too. It’s not me I’m worried about, it’s the devastation to Gail and David. How the fuck do you ever make up for that? Yes it can be viewed as collective and they are by no means vindictive, in fact quite the opposite. Anyway, you just can’t look back, I know. But just for one minute here and there, I’m allowed to.”

By late September, after months of protracted negotiations with the bondholders, a deal is reached to place Canwest’s broadcast assets into creditor protection. The new capital structure, valued at $275 million, strips the Aspers’ controlling interest to 2.3% from 47.6%. Although Leonard, David and Gail are divided over whether to approve the pre-packaged plan, they decide to “take the bird in the hand and let chips fall where they may during a filing.”

After the board meeting that makes the CCAA filing official on Oct. 4, Leonard repeats to Burney what his brother David had said: “Tell the board thank you, we’ll take it from here. It’s not your fight, it’s ours, you don’t want the risk/liability. You’re peacekeepers, this is a war zone.” After Leonard returns home, he writes an email to Gail and David: “Just saying sorry and that while I don’t think I could have done anything different without hindsight, the fact is I cost them money and if I ever got it back, I’d share my winnings with them.”

 OCT. 6, 2009: “CC Double Day”

Canwest Media Inc. voluntarily files for creditor protection under CCAA. Putting on a brave face, Leonard publicly describes the filing he vehemently fought against behind closed doors as a “cleansing exercise for the company,” and vows it will emerge stronger. Few believe him. After reassuring employees, advertisers, the Canadian Radio-television and Telecommunications Commission, federal Minister of Heritage James Moore, his mother and siblings, Leonard spends the evening of what he dubbed “CC Double Day” at home singing “Castle on a Cloud” on a karaoke machine with his two young daughters, Sarah and Olivia.

Four days later, Leonard is in Florida with his family. During a midnight stroll alone, he debates whether to continue fighting. “No matter how much viscerally I want to go to war to get a better deal, it keeps coming back to staying cool, keeping my salary, staying on the inside, getting the right to speak to people to get a better deal for Aspers,” he writes.

Not long after the CCAA filing, Leonard crosses paths with a former writer at a Hollinger trade publication not acquired by Canwest in 2001. He learns that when Izzy was asked why he didn’t buy all the publications from Hollinger, his father replied, “it was just a bridge too far.” Leonard is also told that Izzy confided to the writer that he felt like he was “captain of the Titanic.” Stunned and angry, Leonard takes to his journal once more. “It would have been nice if he’d come to me and said, ‘not sure we should have done this, let’s sell,’ instead of letting us all drink the Kool-aid.”

Crisis Lines, Part 2: Inside Leonard Asper’s fight to win back his family’s TV empire

Theresa Tedesco | 06/11/13 | Last Updated: 06/11/13 12:29 PM ET
An exclusive look at Leonard Asper’s losing battle to keep control of the Canwest family dynasty as revealed in his extensive business journals. This is the second in a three-part series. Read part one here.

Leonard Asper is wearing a Batman costume. It’s Halloween day, 2009, a little more than three weeks after the Asper family lost control of Canwest Global Communications Corp., when the country’s largest media empire sought court protection from its creditors. The youthful president and chief executive, who took the reins of the Western Canadian giant 10 years earlier, is still comforting shell-shocked staff at the company’s Winnipeg head office. The costume, which Leonard later wears in defiance during a board of directors meeting, is designed to send a message to the company and all those who have “thrown the Aspers under the bus,” he writes in a journal. Because the Aspers intended to reclaim the family dynasty, “we all know it will be a superhero that is needed to pull this off.”

Siblings David, 54, Gail, 53, and Leonard, 49, refuse to meekly relinquish their 47.6% controlling interest in the media behemoth founded by their father Israel “Izzy” Asper in 1974. Once the company finally files for court protection under the Companies’ Creditors Arrangement Act (CCAA), the Aspers launch a campaign to regain control of the two main divisions Canwest: one which owns a newspaper chain of 13 major dailies, including the National Post, and the other that controls the Global Television network, the specialty channels of the former Alliance Atlantis and dozens of other radio and broadcasting operations in Canada, Australia, New Zealand and Ireland.

Ultimately, the founding family is grudgingly forced into the queue of potential suitors for the broadcast assets, upon which it built its empire, and for the publishing assets acquired in 2001 that helped create the $3.7-billion mountain of debt under which Canwest ultimately collapsed.

After more than a year of persistent requests, the Financial Post was given access to Leonard Asper’s business journals — seemingly endless notes on desperate meetings with the most powerful executives in Canadian business. In a three-part series, theFinancial Post and Financial Post Magazine tell the personal tale of how Leonard Asper fought to keep Canwest in family hands, how he lost that battle and then conspired to reclaim the lost legacy. Here, in part two, Leonard makes his play to regain his father’s legacy, the television business.

FALL 2009: “We’ve lost money, we want it back”

Months after Canwest Media Inc. defaults on some of its loan covenants, the parent company which held most of the broadcast assets — including Global TV network, and 13 lucrative specialty channels, like Showcase, the Food Network, and HGTV — voluntarily files for creditor protection under CCAA on Oct. 7, 2009. In a pre-packaged recapitalization plan hammered out with a group of Canwest’s lenders, namely Wall Street hedge fund Golden Tree Asset Management LP, and distressed investor Angelo Gordon & Co., the 47.6% controlling interest once held by the Aspers is stripped down to a meagre 2.3% of the new equity.

Potential suitors for the broadcast assets begin circling quickly. John Cassaday, president and chief executive of Corus Entertainment Inc., and Edward Rogers each visit Charles Winograd, the veteran Bay Street financier who has been retained by the Aspers as an adviser, and Gerry Cardinale, managing director of Goldman Sachs Group Inc., which teamed up with Canwest to acquire the prized specialty channels from Alliance Atlantis in 2007. Under the terms of their shareholder agreement, Goldman Sachs has the right to trigger a sale of the joint entity that housed the assets in the event Canwest filed for CCAA. That means any potential transaction for the Canadian broadcast assets will need the blessing of the U.S. financial firm.

For their part, the Aspers are not relegated to the sidelines although Leonard is resentful of “having to go through an auction to win back the fucking company.” His life becomes a peripatetic series of meetings, strung together over weeks and months across Canada and the U.S. looking for financial partners who will underwrite his reclamation project. In the early days, he meets or reaches out to many of Canada’s biggest money men: Newton Glassman, managing partner of Toronto-based private capital equity firm Catalyst Capital Group Inc.; Michael Lee Chin, a Canadian business magnate and philanthropist; Michael Sabia, chief executive of giant pension manager Caisse de dépôt et placement du Québec and others.

Leonard is counselled by a friend to develop a killer attitude. “He started out by saying I need to either change or have someone beside me who will be seen to be ready to detonate a bomb in a room and I don’t have the reputation,” he wrote. “The thing is, Izzy wouldn’t do that either, but he was a good actor, so people thought he would.”

The Aspers hatch a plan “to go to the Canadian families.” This means buying out the bondholders and then running an auction in the hope that the country’s other major family-controlled media companies — namely, Shaw Communications Inc., Rogers Communications Inc. and Quebecor Inc. — will fall over each other to bid. Of course, part and parcel with this plans is the Aspers retaking a toehold in Canwest.

In mid December, Leonard and his brother David travel to Calgary to meet with Jim Shaw, CEO of the largest cable company in Western Canada and, like Leonard, heir to the family business. “David and I went to Jim Shaw’s house. We did a tour of his house which did not look lived in. He was hugging us one moment then putting his hand on my chest in a joking but not so jokey way … Anyway, we got down to lunch and fortunately the food helped him focus a bit more. One thing about Jim is he sees things with almost unmatched clarity and focus.” During the meeting at Shaw’s home in the exclusive Calgary neighbourhood of Crescent Heights, the Asper brothers assume their host is looking at a possible investment, especially because Mr. Shaw kept asking the Aspers what they want. “We said we’ve lost money, we want it back. We’d like to keep control, but if the economics work that is not important and I’d like to have a chairman/executive chairman role and as David described it, a governance role not an operating role.” Toward the end of the meal, Mr. Shaw asks how much money the Aspers need to make their play for the broadcast assets. “$500-million would take care of everything,” they said. According to Leonard’s notes, Mr. Shaw replies, “OK, I’ll talk to the boys.” David turned to his brother, “and he just gave me our trademark eyes bulging ‘are you shitting me’? look.”

Everything is suddenly breaking the right way. A month later, Mr. Shaw calls Leonard to confirm the Calgary company’s board of directors wants to pursue a possible deal to acquire Canwest’s broadcast assets. The two agree to meet on Mr. Shaw’s yacht in Nassau, Bahamas the following week. Leonard is also heartened when Mr. Shaw publicly acknowledges that he has been in talks with the Aspers. “I felt extremely good about his willingness to accept that we have value and work with us to make a deal,” Leonard writes. Those warm feeling drain away quickly when Calgary executive cancels the meeting in Nassau at the last minute. Leonard gets the uneasy sense the western Canadian cable company may be planning to “gang up” on the Aspers. In a prescient journal entry, Leonard notes, “Looking back later, although this is not the beginning of the chain of events, this will be seen as the call that set the ball in motion for Shaw to be the ultimate buyer of Canwest.”

WINTER 2010: “We had nothing to lose”

Inside Canwest, there’s little love left for the founding family. Gail and David, both directors and senior executives, are forced to resign but Leonard remains as CEO. Although they receive handsome severance payouts, Leonard rails against the indignity caused by what he calls “backstabbers and weasels.” In his journal, he declares, “In the next round I will tolerate no people who disrespect my leadership. I put everyone on [the board], with Gail and David, and they just fucking turned on us, plain and simple.”

Leonard’s fears about Shaw are fully affirmed when he learns the Calgary cable giant has done an end run around the Aspers to negotiate directly with the U.S. bondholders, who now control Canwest, and the company’s board. To Leonard’s dismay, Shaw tables an offer of $95-million to acquire at least 20% of the television business — and 80% ownership of the voting shares. Canwest’s board accepts the bid, but the dissenting Aspers are livid — less than $100-million to gain control of a sprawling, cash spinning, international media company. Frank McKenna, a former Canwest director and deputy chairman of Toronto Dominion Bank, is dispatched by the board to deliver a message to Leonard. “He had a script to read to me and family,” Leonard writes about the former premier of New Brunswick., who was Canwest’s interim chair after Izzy’s death. “He was supposed to call me to convince me why this was the best deal, as if I had some fucking say in the matter. I asked how to convey the message that I was disappointed there was no role for me or us.”

In the next round I will tolerate no people who disrespect my leadership

Undaunted, Leonard begins scheming a so-called plan of “disruption and delay,” designed to create havoc with Shaw’s offer. He meets with Rogers CEO Nadir Mohamed in Stanley Park during a torch relay for the 2010 Olympics in Vancouver. Given that Shaw has now played his hand, Leonard tries to goad Rogers into responding. “We discussed … how Goldman Sachs, Asper and Rogers might drive a wedge through the [Shaw] deal and he seemed very interested…. I sure as hell hope I can get them to bite,” he writes. To stoke some competitive fires, Leonard reminds Mr. Mohamed how Shaw reneged on a long-standing non-compete agreement between the two companies in 2009 when it bought Hamilton, Ont.-based Mountain Cablevision Ltd.

During the flight home to Toronto, Leonard decides “to go full bore” on Rogers in the hope the Toronto-based telecom behemoth will seize the moment. But the initial response is tepid and Leonard is desperate to find a way to stall the Shaw transaction and to buy his family time to find deep pockets to keep Canwest out of his competitor’s hands. With the deal’s closing deadline fast approaching, it is the Aspers who are forced to seize the moment. They turn to Goldman Sachs and Catalyst to mount a competing bid. Their counter attack is premised on a legal opinion from retired Ontario Superior Court Justice James Farley that the Shaw transaction is technically not a done deal until approved by a court. The only way Leonard and his partners can topple it is with a firm offer of their own. If not, they need to ask the court to postpone the hearing to approve Shaw’s deal. They chose the latter, although, according to Leonard, he and his brother disagree. “I say the only way Shaw will give us anything is if we fight them with Goldman,” Leonard writes, but his brother, David, worries that “the risk is we lose and we guarantee we get nothing. No right answer, just bets basically.” Ditto for sister Gail, who is uncomfortable with the plan. “She thought we had to be prepared to walk as she was not prepared to take on risk (undue) to preserve a legacy. Her message was don’t do a deal just to do one. I hope to pleasantly surprise her,” Leonard writes.

To that end, Leonard meets in Manhattan with Catalyst’s Mr. Glassman and Goldman Sach’s Mr. Cardinale in mid-February to work out a deal they hope will halt the approval process and force Canwest’s board to consider other bids. The three parties haggle well into the wee hours of the night. At 4:45 a.m., Leonard leaves his luxury hotel room at the southern tip of Manhattan and heads out to the airport armed with the skeletal outline of an offer: $120-million for 32% of the television business, although the Aspers receive less than 5% of the total equity of the restructured company with Leonard as non-executive chairman. “Over the course of the day we hammered out the deal which was very generous/reasonable for Aspers. We did not get everything we wanted,” Leonard declares. He tells his mother, Ruth, and later he quietly informs a handful of senior Canwest managers of his impending offer. “All to my face were supporters,” he writes, adding his brother, David, says “Winnipeg was going pretty nuts too” at the prospect of the Aspers recouping the company.

The Asper group takes its 11th hour offer to the court the same day Shaw expects its deal to be rubber stamped in late February. Not surprisingly, Shaw refuses to extend its closing date. Ontario Superior Court Justice Sarah Pepall decides to compare the two deals on the spot. During oral arguments, Leonard is struck by the irony of Canwest lawyers fighting the founding family with company money. After brief legal skirmishes, Justice Pepall sides with Shaw. Wounded, Leonard and his partners pledge to appeal the judge’s decision because, he writes, “we had nothing to lose.”

This was the firing, replete with disingenuous words like ‘it’s with a heavy heart’

In the immediate aftermath, he’s wrong. Canwest chairman Derek Burney — former Canadian ambassador to the U.S. and a mainstay of the upper offices of the Canadian corporate establishment — tells Leonard he’s in “deep doo-doo.” Mr. Burney claims Leonard likely breached his fiduciary duty as CEO by getting involved in a competing bid to derail an offer approved by Canwest’s board. Leonard pleads his case. “I told him I’d considered the bid by Catalyst was actually in the best interest of the company because it avoided lengthy litigation with Goldman and a lengthier CRTC [regulatory] process and the Shaw bid was far too conditional.” Still, fearing recrimination from Canwest, he sets up a new office on Bloor Street in downtown Toronto.

The next day Leonard is terminated as chief executive, just over 10 years after he succeeded his father to helm of the family company. “This was the firing, replete with disingenuous words like ‘it’s with a heavy heart’,” Leonard muses about the follow up call from Burney. “He offered me termination pay and the usual elegant public story. I was actually feeling quite good. If I get my $1-million, don’t have to work, and can spend full time on the bids, all the better,” Leonard writes. He later explains his firing to senior managers saying “my support of the Catalyst bid had put me in conflict with the direction the board was going and I intended to support the bid going forward making it impossible for me to continue as CEO.” He tells them “sorry that I could not keep the dream alive,” and that there “will be no teary, maudlin farewell because either I would be successful or I would throw a helluva farewell party if I am not.” Days later, Leonard cries at a pizza lunch with staff in Winnipeg. “I started to thank them and suddenly I lost it. Yes, I cried because no matter what happens, all these people lose their jobs. So in between sobs, I said if you dream big, sometimes you win, sometimes you lose. I said no matter what, I will be in business. I will build a great company and maybe one day they can be part of it again.”

SPRING 2010: “I have to stop Shaw”

Consumed with derailing Shaw, Leonard and his partners appeal Justice Pepall’s decision to bless the offer — and this time, they win their reprieve. The next step is mediation with Ontario Chief Justice Warren Winkler. However, after two weeks of haggling, a negotiated settlement is reached on April 16. The stakes have been raised: Shaw agrees to pay $1.8-billion in cash, plus $480-million to buyout Canwest’s debt holders and an additional $700-million to Goldman Sachs. The Aspers will get nothing. “I left dejected, thinking it was all over,” Leonard writes in his journal. Frustrated that Shaw “got the benefit of a private deal, not a proper auction,” he appeals directly to Edward Rogers III, the 44-year-old scion of the family-controlled telecom company that bears his name, urging him to step into the fray. Mr. Rogers says he’ll think about it. Leonard is adamant: “I have to stop Shaw.” Discouraged, Leonard vows he won’t quit, writing, “I still don’t believe my Dad’s dead so it’s hard for me, constitutionally, to ever give up hope.”

I still don’t believe my Dad’s dead so it’s hard for me, constitutionally, to ever give up hope

When Shaw’s mediated settlement is blessed by the court in early May, Leonard figures with a closing date of June 21, he still has time to block the transaction. He continues to solicit deep pockets — powerhouse private equity players Kohlberg Kravis Roberts (KKR), Blackstone Group LP, Carlyle Group and Brookfield Asset Management — hoping he can entice one of them to partner with the Aspers to challenge Shaw if he is successful in forcing an auction. In the interim, he needs to buy some time by postponing Shaw’s court approval. So Leonard is back on the phone to Mr. Rogers imploring him to at least file a letter with the court indicating the company would consider bidding for all of Canwest’s broadcast assets if an auction were held. That would trump Shaw’s offer, Leonard argues, and demonstrate to the court that there are other potential buyers that Canwest needs to canvass. “[Edward has] bought into the stick-it-to-Shaw theory,” Leonard enthuses in his journal. The two young media moguls agree to meet the next day. Leonard visits Rogers’ head office in downtown Toronto with his advisor Mr. Winograd to deliver an hour-long presentation outlining what they called, a “Rogers swoop-in move,” to Messrs. Rogers and Mohamed. The Rogers executives deliberate with others in private while Messrs. Asper and Winograd retreat to a nearby Starbucks coffee shop. Later, Mr. Rogers declares the company needs a week to put something together. Leonard practically begs: “I told him unless a letter went in today, it was not going to happen. It had to be a knockout blow.” But, while the cable and wireless company would happily participate in an auction if a judge orders one, it doesn’t want to be involved in an unseemly, and very public fight. Leonard relays the disappointing message to his siblings and is annoyed that Gail and David appear to “have thrown in the towel.” Leonard takes out his frustrations in his journal: “Can’t buy one fucking break in this whole thing. But there is no reason not to fight to the finish right through the CRTC and the courts. I know I am going all the way with or without David and Gail. Nobody’s ever going to win a fight against me on a TKO, they’re gonna have to put me motionless on the mat needing a blood transfusion before I quit.”

Shot down by Rogers, Leonard petitions another Canadian media family. He calls Pierre Karl Peladeau, president and CEO of Quebecor Inc., the Montreal-based communications company. But the 52-year-old Peladeau isn’t sold on the idea of a competing bid or a letter to the court. Sensing his options are quickly diminishing, Leonard notes in his journal, “We are into miracle territory. You never know what can happen and I would never be able to sleep knowing I didn’t take it to the final whistle.”

In late May, Leonard and his partners, Catalyst and Goldman Sachs, once again ask the Ontario court to halt Shaw’s bid. The players return to Justice Pepall’s courtroom in June and she welcomes them by reading the small army of lawyers the riot act.

During the hearing, the sides trade verbal barbs. The Asper group says Canwest failed to conduct a vigorous solicitation process to find buyers willing to acquire 100% of the equity in Canwest, while the company’s lawyers lash out at the Aspers “misguided” attempts for a re-auction. Judge Pepall orders both sides to resolve the acrimonious dispute in the “national interest.” Meanwhile, Mr. Peladeau sends a message through a director of Quebecor — Former prime minister Brian Mulroney — that he may have had a change of heart. “My head felt ready to explode,” Leonard writes. Still hopeful of convincing a major player to intervene, he travels to Montreal and meets with Mr. Peladeau. But his host promptly announces he has a legal opinion telling him that Leonard’s legal gambit “has no chance” and it’s not worth weighing in just to rile a distant rival. Even the Aspers’ chances with KKR and Blackstone wither because the private equity firms view the hostile approach as “too expensive and too risky.” Leonard has just run out of options.

SUMMER 2010: “I just lost the … company”

On June 22, the warring factions stand before Justice Pepall, who is now calling the case “ridiculous.” With no white knight — and no miracles forthcoming — the court gives final blessing to another revised bid from Shaw, which now includes $2-billion for all the equity in the television business. With that, the Aspers are officially ousted from the family firm (although they receive close to $5-million for their troubles). In his journal, Leonard mourns, “I just lost the fucking company,” adding “if I get one more sympathy email saying sorry it’s over, I’ll puke.” Later, he appeals to the elder JR Shaw for an additional $5-million for his 77-year-old mother’s pension, and bitterly laments that his father’s old adversary refuses to even allow the Aspers to keep the soon-to-be-discarded Canwest name.

 

Crisis Lines, Part 3: Chasing a ‘great Canadian newspaper company’

Theresa Tedesco | 07/11/13 | Last Updated: 06/11/13 5:44 PM ET
An exclusive look at Leonard Asper’s losing battle to keep control of the Canwest family dynasty as revealed in his extensive business journals. This is the third in a three-part series. Read part one and part two.

While on a family vacation in the Galapagos islands off the coast of Ecuador, Leonard Asper chats with his mother Ruth. It’s late December, 2009 when mother and son ruminate about the family business, Winnipeg-based Canwest Global Communications Inc. founded by Israel “Izzy” Asper in 1974 and now in ownership limbo. It’s one of the few times the pair has talked at any length about the fate of Canada’s largest media company since it voluntarily sought protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA) two months earlier. Since then, Leonard has logged thousands of kilometres, furiously trying to attract deep pockets to help the family reclaim the company. It’s a strained conversation.

Crisis Lines: Postscript

Why did Leonard Asper share his journals with the Financial Post?

Find out here

“Mom was worried because she wasn’t sure we were smart or capable enough,” Leonard writes in a journal he kept during the corporate saga. “When I calmly challenged her, she said, ‘well you guys haven’t really done anything.’” Defensive, Leonard writes that he listed all the value-creating deals he’s done with his siblings David and Gail. “She said, ‘well, ok I guess.’” Frustrated, Leonard later snipes, “Unbelievable. We have all this debt from Dad’s newspaper deal and she has the gall to say we haven’t done anything when we’ve been running highly profitable businesses for the last 10-15 years. Not worth fighting over.”

But Leonard is in a combative mood. For weeks, he’s been waging a campaign to delay a court restructuring of Canwest Limited Partnership (LP), the division that houses 13 major metropolitan daily newspapers, including the Vancouver Sun, Calgary Herald, National Post, Ottawa Citizen and The Gazette in Montreal, as well as a 126 community and weekly publications and Internet properties purchased in 2001 for $3.2-billion.

JANUARY 2010: “This isn’t your father’s banking syndicate”

Leonard is adamant that a CCAA filing is premature, if not unnecessary, to restructure Canwest LP and its debt. He argues patience and an improving economy could yield a higher price for the assets down the road if a sale is warranted. That position has put him on a collision course with Bank of Nova Scotia, the lead lender among 183 creditors in all who have little goodwill left for a company that has been in arrears on hundreds of millions of dollars in interest payments for several months.

Leonard is miffed with Scotiabank’s chief executive Rick Waugh, who has been trying to broker a partnership between Canwest LP and Torstar Corp., owners of the Toronto Star newspaper, since the summer of 2009. He tells Leonard the Aspers are “toast,” and according to Leonard’s journals, Mr. Waugh urges him to consider creating “a great Canadian newspaper company, to take some equity, save face and get a seat on the board.” Incredulous, Leonard later fumes, “are you kidding me? I told him I wouldn’t want a part of a newspaper company run by Torstar management (respectfully of course) and that I thought I had better management by far.”

Since that conversation, Leonard is increasingly troubled by the direction creditors are leading the company. He tells Scotiabank as much in a letter in which he declares “I profoundly disagree with an early CCAA filing,” and that he is “particularly concerned” that a filing would result in “undue and unnecessary harm” to the company’s shareholders, most notably the Aspers. Worried about how the bank will react, Canwest chairman Derek Burney cautions him not to send the missive but Leonard ignores him, writing, “I felt great doing it.” Inevitably, Scotiabank responds with its own tartly-worded dispatch when a senior executive practically accuses Leonard of being an emperor without clothes, saying he has “no corporate authority” to make proposals or tell the company what to do.

The bickering culminates in a testy meeting with Canwest’s board of directors in the offices of law firm Osler, Hoskin & Harcourt LLP on Jan. 7, 2010. High above Toronto on the upper floors of First Canadian Place, officials from Canada’s third largest bank threaten receivership because there is “no equity value” in the company. They remind Leonard that “this isn’t your father’s banking syndicate.” Scotiabank is referring to its long-time relationship with Izzy and the fact the varied players in the creditor group don’t always operate with the same agenda. For almost five hours, representatives from the bank, lawyers from Oslers and investment bankers from RBC Capital Markets, who are hired by Canwest to help restructure its operations, urge the directors to put the company in CCAA. Leonard is incensed, feeling the advisers “clearly felt their job was to manipulate the board, or better said, bully us, to vote the way they thought we should.” He challenges the lawyers and bankers about their motivations, and later writing in his journal, declares, “they used their expert scare tactics about a receivership and that they were empowered but when I asked whether they were obligated, they dodged the question.”

We have all this debt from Dad’s newspaper deal and she has the gall to say we haven’t done anything

Once the hired guns leave the room, Mr. Burney canvasses the nine Canwest directors for their opinions on what they had just heard. He starts with Leonard, who has already agreed in advance with his siblings that he’ll vote in favour of the CCAA if two main conditions are met: consideration to protect the family’s equity and substantive changes to the board. The Aspers siblings expect long-time directors Margot Micallef and Frank King to vote against a filing and so will David and Gail. That will allow them to shoot down the proposal. However, if there is a tie, Leonard could play good cop and his conditions could be the middle ground the other directors could converge toward. Two other directors align themselves with Leonard and support the CCAA filing and the four dissenting votes are cast as planned. One director abstains due to a conflict. The tally: three in favour of a filing; four reject it. The Asper strategy works perfectly. Leonard urges Mr. Burney to cast his vote, but the chairman refuses. So Leonard and some of the others request more time to discuss the matter and ask for a brief adjournment until 8 a.m. the following morning. Again, according to Leonard, Mr. Burney rebuffs the idea and instead announces he is resigning from the board. He is followed by three others, although Lisa Pankratz had previously notified of her decision to step down prior to the meeting.

Surprised, Leonard and his siblings confer and decide the “professional directors” who don’t have any skin in the game, are worried the creditors will foreclose if the board doesn’t agree to file for CCAA. Clearly, they don’t want to be part of a liquidation. For one, if that were to happen, all of the directors would lose their jobs, unlike in a CCAA where they would continue to collect fees to oversee the restructuring. Leonard tries to convince them that foreclosure is an empty threat but “they thought it was the end of the world and they didn’t want to be part of it,” he notes. Still, the Aspers are not prepared to cause further turmoil for the company with the sudden resignation of three board members. In an attempt to resolve the impasse, the directors continue talking and long-time director Frank King changes his position and decides to support a CCAA filing. Eventually, another vote is taken and everyone on the board agrees to support a CCAA filing “on the basis there will be changes to the board,” Leonard writes. Afterward, Mr. Burney and Leonard leave Osler’s in silence. “Then we rode down in the elevator together and he looked at me, I looked at him and he did a punch to my cheek that stopped just before contact. It was not hostile but it was strong. It reminded me of my Dad. It was sort of an angry love tap.” From there, Leonard heads to his office to warn Canwest’s senior managers.

The next day, the newspaper chain that Izzy acquired shortly before his sudden death in 2003 is put on the sale block. Under a pre-packaged agreement, the bank-led creditor group proposes to swap their $940-million in debt for all the assets in the newspaper division and spin them into a separate company, with the banks holding the new equity while the unsecured creditors, including the Aspers, would likely recoup basically nothing. That $940-million is now the number to beat. “This is a process not an event and this was but one stop along the way.” Leonard writes. “I never sought out these newspapers, we ran them better than any other industry players in North America, and there was no way this situation could have been predicted or dealt with. I am seriously considering mounting my own bid. And if I lose, so what?”

The Aspers intend to make good on their hard-won concession to make changes in Canwest’s boardroom and begin searching for possible candidates. Meanwhile, potential suitors quickly begin to surface for the newspaper chain as RBC Capital Markets, which is leading the sale of LP, solicits bids between $1-billion and $2-billion, although many industry observers say it won’t fetch more than $925-million. Among the early entrants, which would eventually grow to a total of 26, are ex-Liberal senator Jerry Grafstein, Torstar, Paul Godfrey, chief executive of the National Post, while speculation abounds that Quebecor, which owns 43 dailies and 200 community publications, will join the fray.

It really is Shakespearean … words cannot express my anger, but revenge will have to be served cold

Unlike many of the other potential buyers, John Honderich, chairman of Torstar, is making co-operative noises. During a dinner at the Toula restaurant — on the top floor of the Westin Harbour Castle Hotel, just steps from the Toronto Star newsroom — the two media executives discuss a possible pre-emptory strike. “He’s very interested but played a little coy, not unexpectedly,” Leonard writes.

Four days after the dramatic board meeting, the company’s advisers, ask for the resignations of Leonard and his siblings from the company’s board. Outraged, they refuse. “It really is Shakespearean,” Leonard marvels, “words cannot express my anger, but revenge will have to be served cold. This is a war where all allegiances are of expedience and will end the minute the reason for them ends.” Suspicious that Mr. Burney was behind the plan to purge the Aspers, Leonard writes “Et tu Derek?” in his journal later that day. After David and Gail agree to resign (although are retained as consultants), Leonard confronts the chairman, who he writes, “admitted he wanted the departures,” describing it as “elegant for me, David and Gail, and streamlined for the board.” Still Leonard isn’t convinced. “He’s a wickedly good politician.”

For the Aspers, it’s another betrayal. “This really is a lesson in board selection. Pick the people who will be there in a dogfight, not window dressing types. That said, I did pick Derek for that reason. The dog just forgot who its master was,” Leonard muses.

FEBRUARY 2010: “Show me the deal”

In the aftermath of the board ejections, Leonard meets with former Newfoundland premier Brian Tobin about joining as a director, but Mr. Tobin figures “the board may no longer be where the action is,” and instead offers to help find financial partners for the Aspers.

As the court extends the bidding deadline, the Asper siblings clash over whether to join the auction. During a family meeting to discuss their options, Gail says, “show me the deal,” while David is of two minds, “probably not [in favour] but he’d help it look like he was to get the deal done,” Leonard notes.

They decide they’ve got nothing to lose so Leonard tests the waters for potential partners. He tells Torstar’s Mr. Honderich that he’s been approached by others to join in a bid, and has lunch with a senior official from U.S. giant Providence Investment Management who “can’t get his head around newspapers because even if operating model OK, no visibility on the unwind value (exit strategy).” If nothing else, Leonard figures he could use Providence to help him find possible U.S. partners. But in early February, Leonard worries that “unless a backer pops out of the woodwork this week on newspapers, I have to let it go.”

Then Michael Serruya, who founded CoolBrands International with his brother Aaron, emails Leonard “out of the blue” about their interest in putting together a possible deal for the newspapers. Mr. Serruya and Leonard meet for lunch at upscale restaurant Pangea in Toronto’s Yorkville neighbourhood for preliminary talks. This is when Leonard learns Mr. Serruya is part of a bid being put together by a group fronted by Mr. Godfrey that includes the Alberta Investment Management Corp. and Onex Corp. Not long after his lunch meeting with Leonard, Mr. Serruya “gracefully” exits Mr. Godfrey’s group. Leonard notes that Mr.Godfrey, 71, former head of Major League Baseball’s Toronto Blue Jays, is “a little surprised at the idea that I was really intending to mount a bid.” A popular former politician, Mr. Godfrey wouldn’t commit to a bid with Leonard but he nonetheless told him “that if I prevailed he’d be happy to work with me then. We agreed Torstar was potentially the team to beat because of synergies although the Competition Bureau is a factor.”

MARCH 2010: “We may need it, so never say, never”

Perhaps the strangest overture Leonard receives is like a blast from the past. Bay Street financier Lionel Conacher contacts Leonard because Dan Colson, former chief executive at the Telegraph Group in London and long-time business associate of Conrad Black, wants to assemble a group of people from the U.K. who might be interested in taking a run at the newspapers. Would Leonard like to meet? “I saw right through that and asked how much Conrad Black was putting in,” Leonard recalls. When Izzy Asper famously bought the newspaper chain from Mr. Black’s company Hollinger International Inc. in 2001 at peak market prices just before newspaper values plunged — the deal was dubbed the “Canterbury Tale” after the address of Mr. Asper’s oceanfront Palm Beach, Florida mansion — Mr. Black and his former business associate David Radler privately ridiculed the transaction in correspondence that became public during the 2007 criminal trial in Chicago. “I reminded Lionel of Conrad’s disparaging remarks about Izzy,” he writes. “But if Colson has $50-million, we may need it, so never say, never.”

Meanwhile, Leonard himself is finally forced to resign from Canwest as CEO and director by the company’s board over potential conflicts arising out of his family’s involvement in bids for the assets.

APRIL 2010: “Fight … the real enemy, Torstar”

In the first week of April, Leonard returns to visit his father’s grave in Winnipeg for the second time. “The loonie I left on Dad’s grave was still there, so I put another one on top,” he writes. “I didn’t want another shit show of sobbing,” so Leonard takes a moment to reflect, staring at the inscription “reach for the stars” on Izzy’s tombstone and proclaims out loud, “don’t worry, I always have and always will.”

As the deadline for bids approaches, round one of the process requires all the interested parties to file preliminary indications of their interest to the RBC investment bankers. The Aspers are among the 26 initial bidders, having filed a preliminary offer worth about $950-million in partnership with the Serruya brothers and U.S. businessman Ron Burkle, head of Yucaipa Cos., a private equity firm in California. The next deadline is April 30 and a mad scramble ensues in the weeks leading up to the final round. As Leonard tries to nail down the financing components of his bid, he visits with Mr. Godfrey at the National Post offices in Toronto to commiserate and gather information on how the competition stacks up. Mr. Godfrey, who has partnered with Onex and AIMCO for the first round, concedes his bid probably won’t make the final cut. Leonard figures he’s “either a good bluffer or he was genuinely concerned and exasperated.” In fact, Mr. Godfrey is so despondent about the $600-million low-ball offer his group tabled, that he’s considering abandoning Onex and AIMCO and asking RBC to let him partner with others. “So we talked about him joining my group; he said he’d be glad to work for me again, but he also said he was talking to two other potential new partners. I said don’t do that, bring them to our group so we can fight what we agreed was the real enemy, Torstar.”

Meanwhile, Leonard gathers some of his own intelligence, notably, that Torstar has partnered with Fairfax Financial Holdings Ltd. But he also learns that their initial bid “is not clean” apparently because it has conditions attached to it, namely cash and stock, and it’s making it hard for RBC to value. Even more significantly, Leonard hears that a group of creditors, namely Golden Tree Asset Management LP, the Wall Street hedge fund that manages about US$12-billion, are willing to bid over $1-billion and that Mr. Godfrey has been invited to join the bondholders.

With that, Leonard and his siblings know the jig is up. Less than a week before final bids are to be filed on April 30, his epic attempt to buy back the newspapers on which his father leveraged the company “caved.” The reasons: the Aspers and their partners are not willing to make a $10-million deposit as required, to enter a bid they know has a low percentage chance of succeeding — and they still can’t secure the financing. Without a letter from a reputable financial institution confirming the funds are available, a final offer did not materialize. Leonard consoles himself saying “if the bondholders were going in higher, the fight is not worth it.”

MAY 2010: “No rearview mirror”

On May 18, Canwest LP’s myriad of creditors vote in favour of the $1.1-billion bid fronted by Mr. Godfrey and Golden Tree. A month later, the Canwest chain of papers are brought together under a new corporate banner — Postmedia Network Inc. — after an Ontario judge approves deal. Leonard is already starting to move on. Two months later, he unveils his new venture appropriately named, The Fight Network Inc., a TV channel featuring mixed martial arts programming, which has since expanded into the U.S. and Europe. “For me there is no rearview mirror,” he writes, “there’s only forward.”