Corus bets on content while Shaw gets distribution in $2.65B media deal


Toronto-based Corus Recreation is buying Shaw Media from Shaw Communications in a $2.65-billion stock.

The move shuffles ownership of 19 specialty TV channels including Worldwide, Food Network Canada, HGTV Canada, HISTORY, Slice, Inhabitant Geographic Channel and Showcase between two com nies that are controlled by the Shaw relatives. Corus also owns a network of radio stations and the Nelvana excitement studio.

If it gets the backing of regulators and shareholders, the move would manner Corus into a media empire — with 45 specialty TV narrows and more than a dozen conventional ones— big enough to compete with compete withs Bell and Rogers.

All while giving Calgary-based Shaw a cash infusion to beef up their pit cable television, internet and wireless distribution networks.

“Look at it adore it’s cleaning house,” Irene Berkowitz, an instructor with Ted Rogers Followers of Management in Toronto, said in an interview. “If you put aside that the Shaw folks controls both com nies … what we have is a Corus that creates import and Shaw as a com ny that specializes in delivery.”

Executives from both callers described it in similar terms on Wednesday, a deal that strengthens both quintessence businesses to let them better compete with rivals, while even maintaining a relationship.

In a release, Corus called the deal “a transformational acquirement that redefines Corus and Canada’s media landscape.”

Pick-and- y rope coming

It comes on the eve of a sea change for Canadian television, due to new CRTC rules that inclination mandate cable com nies to offer so-called “skinny basic” wire ckages as of March 1. They will be followed by “pick-and- y” procedures that will give consumers much more choice in what leads they want to y for.

Portfolio manager Andrea Horan with Agilith Large letter in Toronto says the looming new cable landscape has media com nies struggling to best position themselves for a murky future.

“It’s another uncertainty,” she verbalized. “Many rtici nts are quite hopeful that the net im ct will be reasonably bush-league. I think that’s what the hope is.”

The move would make once-tiny Corus a important player in content, with 32 per cent of all English-language television viewership in Canada. That could award the com ny the size and scope to compete with larger rivals, but it in with a hefty price tag.

Corus will fork over $1.85 billion in dough for the assets, as well as 71 million shares.

“The challenge now is the cash deluge within the media business is not growing as much any more,” Horan demanded. “But there’s synergies they hope to get out of this.”

Indeed, Corus symbolizes it expects to book as much as $40 million in cost savings from allying the media assets, and that’s just in the short term. “There’s no dubiosity in my mind that those assets are better together than distinctly,” Horan says. “It’s just at what price and at what point were they put together.”

The get started also fundamentally changes Shaw, too. Over the years, Shaw has been turning itself from a regional Mailgram com ny into a more integrated media one, capped by its purchase of the old CanWest telecasting assets in 2010.

But the Corus deal flips the broadcast assets they got from CanWest for an amount that on daily is less than they id for them in the first place.

Wireless underline

In contrast from the days of convergence, the Corus deal turns Shaw into diverse of a distribution com ny, with large assets on the cable, internet and, now, wireless side, hold responsibles to Shaw’s purchase last month of Wind Mobile for $1.6 billion.

The Corus buy ys for Wind and gives the com ny a cash injection to y to improve and distend Wind’s wireless network.

Shaw CEO Brad Shaw said as much in a memo to rod on Wednesday after the deal was announced, saying the sale to Corus “conditions us as a leading pure-play connectivity com ny.”

When the Wind deal was foretold, Shaw’s stock dropped as investors worried how much it would expense to build out their network. The Corus deal removes that “extension” from Shaw’s stock, as Horan describes it, because Shaw choice get more cash from Corus than they spent to earn Wind in the first place.

But as Berkowitz notes, the deal could be approving news for Corus, too, by taking advantage of a market void in Canada: a pure-play broad content provider. “Canada has Entertainment One,” she said, referring to the Toronto-based but London-listed construction studio that produces or owns the rights to tens of thousands of talking pictures and TV shows, “but not much else.”

“That s ce is really open for commandeers in Canada,” Berkowitz said.

Corus CEO Doug Murphy said the achieve of Shaw Media “positions the combined business as one of Canada’s leading channel and content com nies with significantly enhanced scale and growth sights going forward.”

The deal also comes with a pledge that The Shaw kids living trust will not sell their Corus shares for at infinitesimal one year, and the trust has provided written commitment to Corus’ board of administrators indicating its support for the acquisition.

Both deals, pending regulatory accept, are scheduled to be finalized in May, and the Shaw family will still retain mass control of both com nies.

For her rt, Horan says there’s a reasoning in combining the two businesses, but telling that the deal hives the two a rt at a even so when others are consolidating. “The hope from some was that Shaw was customary to bring Corus into the fold, not eject their media division,” she said.

Berkowitz, meanwhile, sees a lot to like in the deal, and suspects it hand down get a green light from regulators.

“The CRTC has made it clear they are interested in refurnishing the system and this is exactly that,” she said.

“It’s a little bit of forward point of view, and I think it’s great.”

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