Canadian telco Shaw Communications has agreed to sell its broadcasting unit Shaw Media to Corus Entertainment for C$2.65bn (US$1.86bn) to help finance its purchase of Wind Mobile. The telco’s CEO Brad Shaw said the deal firmly positions the company as a quad-play provider with an attractive growth profile.
Canadian telco Shaw Communications (TSX:SJR.B) has agreed to sell its broadcasting unit Shaw Media to Corus Entertainment for C$2.65bn (US$1.86bn) to help finance its purchase of Wind Mobile.
Shaw Media consists of the Global Television Network and 19 speciality channels including HGTV Canada, Food Network Canada, History Television and Showcase. Both Shaw and Corus, which owns other specialty TV channels, radio stations and animation studio Nelvana, are controlled by the Shaw family.
Shaw will retain its interest in shomi, its subscription-based video streaming service in partnership with Rogers Communications.
Shaw CEO Brad Shaw (pictured) said the cash-and-share deal firmly positions the company “as a leading pure-play connectivity provider with an attractive growth profile, while allowing Shaw to participate in the significant upside potential resulting from the combination of Shaw Media and Corus”.
Paul Pew, chairman of the special committee Shaw formed in connection with the transaction, commented: “Through this transaction we are able to crystalise an attractive value for Shaw Media and realise substantial value creation for Shaw shareholders since acquiring CanWest in 2010.”
According to Shaw, the purchase price represents about 8.6x proportionate 2015 EBITDA and 7.7x consolidated 2015 reported EBITDA.
Upon closing, the telco will receive about C$1.85bn (US$1.3bn) in cash and about 71 million Corus Class B non-voting shares at C$11.21 (US$7.86) apiece. The latter figure is based on current volume-weighted average trading prices on the Toronto exchange. As such, Shaw will own about 39% of Corus’ total stock.
The transaction is subject to the approval of Corus shareholders, customary closing conditions and approvals from regulators including the Canadian Radio-television and Telecommunications Commission. It is expected to close in Q3 this year.
Upon completion, Shaw will have the right to nominate three directors to Corus’ board.
TD Securities was Shaw’s financial advisor on the deal, while Blair Franklin Capital Partners provided financial advice to the special committee. Both advisors also provided fairness opinions to the company. Barclays worked with Corus on the deal.
Wind Mobile financing
Shaw plans to use the proceeds of the broadcasting unit sale to fund its acquisition of Wind Mobile for C$1.6bn (US$1.12bn), which it also expects to close in Q3.
If the Wind deal, announced last December, closes beforehand, Shaw intends to draw on its previously announced bridge facility until the closure of the Shaw Media transaction.
Provided both deals complete, Shaw said its pro forma net debt to EBITDA leverage metric remains within its target range of 2.0-2.5x.
The company said it believes its enhanced growth profile will strengthen its long-term free cash flow position and ability to boost its shareholder dividend.
The Wind purchase enables Shaw, which has a fibre network serving some 3.2 million customers and a DTH business serving 900,000 customers, to become a quad-play provider, adding wireless to its DTH, fibre, cable and WiFi offerings.
Wind is the country’s fourth largest mobile network operator with about 940,000 subscribers in Ontario, British Columbia and Alberta and 50 MHz of spectrum in each of these three regions.
