Corus Entertainment entered into an agreement to acquire all of Shaw Media from Shaw Communications for $2.65 billion.
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The price is to be paid through a combination of cash and Corus Class B Shares.
The transaction will give Corus ownership of all of Shaw Media’s leading brands, resulting in a combined portfolio with significant scale, including 45 specialty television channels, 39 radio stations, digital assets, the content studio, Nelvana, and 15 conventional television stations.
Shaw Media’s assets include the specialty channels 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.
It also includes Global Television’s national conventional service with stations in Vancouver, Okanagan, Edmonton, Calgary, Lethbridge, Saskatoon, Regina, Winnipeg, Toronto, Montreal, Halifax and Saint John.
On a fiscal 2015 basis, Corus and Shaw Media combined generated ~$1.9 billion in revenue, ~$619 million in adjusted EBITDA and ~$430 million of free cash flow. The transaction is expected to generate $40-$50 million of annual cost synergies to be realized within 24 months, in addition to significant revenue synergies.
Under the terms of the transaction, Corus has agreed to acquire 100% of Shaw Media for a total purchase price of $2.65 billion, representing a multiple of ~7.7x FY2015 consolidated reported adjusted EBITDA.
Upon closing of the transaction, SCI will receive ~$1.85 billion in cash and ~71 million Corus Class B Shares at $11.21 per share, which is based on current volume weighted average trading prices on the Toronto Stock Exchange.
RBC Capital Markets is providing fully committed financing in connection with the transaction. The acquisition and the refinancing of existing Corus debt will be funded with $2.3 billion of committed credit facilities and $560 million of bridge financing.
The bridge financing is expected to be replaced with a combination of new senior unsecured notes and a potential offering of subscription receipts for Corus Class B Shares.
Upon completion of the financing, at close of the transaction, Corus intends to redeem its 4.25% senior unsecured notes due February 2, 2020, of which $550 million principal (plus accrued and unpaid interest) is outstanding.
Pro forma the acquisition, including completion of the potential subscription receipt offering, SCI will own approximately 39% of Corus’ total issued equity, including Class A and B Shares. SCI has agreed to hold and not sell any of its Corus Class B Shares for the first 12 months following closing.
This holding restriction will expire with respect to one-third of the shares on each of the 12, 18 and 24 month anniversaries of closing (the Lock-Up).
In addition, as a further sign of its support for the combined company, SCI has agreed to have 100% of its Corus Class B Shares, which are subject to the Lock-Up, participate in Corus’ dividend reinvestment plan until at least August 31, 2017, so that the dividends payable on those shares will be paid with additional Corus Class B Shares.
This not only signals SCI’s on-going support for the company but also provides Corus additional cash flow that can be used to repay debt or be re-invested in the business. ■