Shaw Communications Corp. cleared its first legal hurdle yesterday when its bid to purchase Canwest Global Communications Corp. was granted court approval, but there may be tougher obstacles ahead.

The decision by Ontario Superior Court Justice Joanne Pepall emerged after a marathon court session yesterday during which a rival bid, led by Toronto-based private equity fund Catalyst Capital Group Inc. and backed by the Asper family, tabled a $120-million proposal that sought to top Shaw's offer.

The judge's ruling was based on a court-appointed monitor's recommendation to support the proposed Shaw transaction, which offered to acquire a minimum of 20% of Canwest Media Inc., and 80% of its voting stock for $95-million. The division holds the company's conventional television network Global and a stable of specialty channels. The plan involves only Canwest's broadcasting assets and does not affect the restructuring or the auction of its newspaper division, which includes the National Post.

Although the financial details of Shaw's deal with Canwest are confidential, the monitor concluded, after reviewing both offers, that the agreement signed between Shaw and Canwest, which is now controlled by a group of U.S.-based bond holders, "remains unaffected by the submission of the Catalyst proposal."

For now, sources say the bid by the consortium led by the Toronto-based private-equity firm, which is also backed by Wall Street investment bank Goldman Sachs Capital Partners, will not be withdrawn.

As well, sources say a group of bondholders are considering legal action because Shaw's deal does not treat all creditors equally. Yesterday, the Calgarybased cable and communications provider had threatened to pull its week-old bid to control the Global television network and a stake in several specialty channels if it did not receive court approval by the end of the day. A source close to the rival bid suggested Shaw was trying to "bully" the court.

"Shaw did a deal with U.S.-based hedge funds by renting its passport to steal the company and the Asper legacy on the cheap," said the source who asked not to be named.

However, in an affidavit yesterday, RBC Capital Markets, the financial advisor to Canwest, urged the court to accept Shaw's offer because it represented "the best transaction available to Canwest Global in the circumstances." Shaw's deal was threatened by the Catalyst-led bid, which offered $120-million for a 32% stake in Canwest Media, and would keep the restructured company public. The consortium sought an adjournment yesterday to have its proposal reviewed. The Catalyst proposal treats all existing bondholders equally, offering them a stake in the restructured company.

The Shaw offer contemplates taking Canwest private by buying out all of the current shareholders, including the Aspers, and forcing holders to take cash or shares depending on the amount of debt they own.

More importantly, Catalyst's bid includes an exclusive agreement with Goldman, Canwest's partner in 13 specialty channels. Goldman and Canwest acquired the lucrative specialty channels, which include the Food Network, from Alliance Atlantis Communications Inc. in 2007. Canwest owns a 35% stake while Goldman controls 65%. However, Shaw has not had any discussions with Goldman and one of the conditions of its bid requires that it successfully negotiate a deal with the New York investment bank. The company has indicated it will seek to cooperate with Goldman now that its bid has the court's blessing.

The U.S. investment dealer has been angry about being deliberately excluded from the sale process by RBC, accusing Canwest of ignoring its rights under their shareholder agreement and therefore limiting the amount of potential suitors for the broadcast assets.

Pierre Karl Peladeau, president and chief executive officer of Quebecor Media Inc., filed a letter with the court yesterday saying his company had been interested in making a bid for Canwest but was discouraged by the fact that it could not deal with Goldman, "which we viewed as a key stakeholder."

Shaw's deal is still subject to a number of conditions, as well as approval from the Canadian Radio-Television and Telecommunications Commission and the federal Competition Bureau.

Canwest Media sought protection from creditors under the Companies' Creditors Arrangement Act (CCAA) last October after its parent company missed interest payments on about $4-billion worth of debt.