Corus in ‘game-changing’ C$2.7bn Shaw deal

Toronto-listed Corus Entertainment is to pay C$2.65 billion (US$1.86 billion) to buy rival Shaw Media.

Doug MurphyThis marks the latest round of top-level consolidation in the Canadian television and telecommunications market, coming under three years after Corus rival Bell Media bought Astral Media for C$3.4billion and during the emergence of DHX Media as a new major player in the broadcast market.

The move comes at a tumultuous time for Canadian television, with a report this month suggesting significant regulation changes coming into in March could cost the sector C$1.4 billion and 15,000 jobs.

Corus was initially formed out of Shaw Communication’s media assets, and spun out to become its own company in 1999. Both companies are still controlled by the Shaw family, though the company is barred from voting the deal through.

The Canadian Radio-television and Telecommunications Commission, as well as shareholders, need to give approval for a merger to go ahead. In practice, the deal brings all of Shaw Media, which is currently part of Shaw Communications, into the Corus fold through an agreemenr financed through a combination of C$1.3 billion cash and Class B shares.

Once completed, Corus will own 45 speciality TV channels, 39 radio channels, content studio Nelvana and 15 “conventional” TV networks. It will own and operates the Global Television channel, which is popular with mainstream audiences.

Shaw Communications, meanwhile, will own approximately 39% of Corus’s total issued equity, including valuable Class A and Class B shares. It has agreed not to sell any Class B shares in the year following the deal.

Shaw’s owned or backed speciality networks include Food Network Canada, HGTV Canada, DIY Network Canada, Slice, Lifetime, History Canada, H2, Showcase, National Geographic Canada, Nat Geo Wild Canada, Action, MovieTime, IFC Canada, Global News: BC1, BBC Canada, DejaView, Crime + Investigation, DTOUR and FYI.

“This is a transformational acquisition that redefines Corus and Canada’s media landscape,” said Doug Murphy, president and CEO, Corus. “This game-changing transaction brings together a powerful portfolio of synergistic media assets that will solidify Corus’ position as the market leader in the highly valued women, kids and family segments.”

Corus expects the merged company to generate between C$40 million and C$50 million per year in cost synergies, in addition to “significant” revenue synergies.

A combined leadership team will be announced “at or prior to the close of the transaction”.

“We are buying Shaw Media at an attractive price, financing it prudently and the transaction is immediately accretive on an earnings and free cash flow per share basis,” said Fernand Bélisle, chairman of a special vommittee of Corus board directors formed in connection with the transaction. “This combination will deliver strong free cash flow which will allow the company to de-lever quickly while maintaining its current dividend.”

Shaw Communications has owned its television and media assets since February 2010, when it acquired 80% of Canwest Global, which had struggled with a large debt pile after the global financial crisis kicked in.

“This is a pivotal transaction that will create one of Canada’s leading integrated media and content companies, with the scale and media assets to succeed in the new regulatory environment,” said Brad Shaw, CEO, Shaw Communications. “Our significant investment in the new Corus demonstrates our commitment to the success of this powerful combination.”

The deal is expected to close in the third quarter of this year.

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