A minority shareholder is now claiming that Corus Entertainment Inc. is paying up to $858 million more than it ought to to acquire related company Shaw Media Inc. and has proposed some new terms it says it would be willing to accept.
Corus minority shareholder urges regulators to review ‘serious’ disclosure concerns in Shaw Media deal
Two market regulators happen to be urged to review whether enough information about Corus Entertainment Inc.’s proposed $2.65-billion purchase of Shaw Media Inc. has been publicly disclosed to permit minority shareholders to create an informed decision
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In a presentation released Thursday, Catalyst Capital Group Inc. said that Corus could increase the need for its minority shares by between 23 and 107 percent, or up to $10.50 a share, whether it chose to renegotiate the relation to its proposed $2.65-billion transaction, which is for $1.85 billion in cash and $800 million available.
Catalyst had initially calculated that Corus was overpaying for Shaw Media by as much as $600 million, including synergies, inside a presentation it made to Corus management on Feb. 16. In its new valuation, the private equity firm employs a lesser adjusted multiple to measure Shaw Media’s enterprise value.
Corus disputed the $600-million you’ll need Tuesday and pointed out that Catalyst had originally asserted Corus overpaid by as much as $200 million. “Catalyst’s internal calculations around the fair value for Shaw Media appear to be based on flawed and ill-informed assumptions that are simply not credible,” it declared.
In an e-mail Thursday, Corus spokeswoman Sally Tindal said the Shaw Media deal was heavily negotiated over a period of 4 months using special committees, adding that two separate fairness opinions were considered. Both deemed the purchase cost of $2.65 billion to be fair.
In a study note published Wednesday, analysts at Canaccord Genuity questioned the claims being produced by Catalyst and wondered whether they would have any affect on the shareholder vote.
“We’re unclear of Catalyst’s motive at the moment and wonder if its arguments holds much sway with Corus’ public shareholders,” the note stated. They wrote that Corus paying “a modest premium valuation” for Shaw Media “appears justified” since Shaw Media is posting flat-to-modest declines in organic earnings before certain costs (EBITDA), whereas Corus’ results have been falling in the mid-to-high single digits.
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- Shaw Communications to market Global TV network, specialty channels to Corus Entertainment for $2.65 billionCorus revenue, earnings will a lot more than double after Shaw Media deal
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Catalyst, a private equity firm that specializes in distressed situations, is also taking problem with how Corus intends to finance the offer, and it is suggesting the company issue fewer shares to lessen dilution and declare a unique dividend, among other requests.
Catalyst is asking that Corus reschedule the Mar. 9 special meeting and publish a revised circular which contains “full and clear disclosure of all material facts which have not been provided in the present circular so they can make an educated decision,” the organization said in a statement.
While this may be a good deal for that Shaw family, it is a bad deal for each Corus minority shareholder.
The bulk of the voting shares of Corus and Shaw are controlled by JR Shaw with the Shaw Family Living Trust. Since this deal is between related parties, Corus necessitates the approval with a minimum of 1 / 2 of the votes cast by its minority shareholders. A week ago, Catalyst urged two securities regulators to examine whether enough information have been disclosed to investors, most notably it believes the Shaw family stands to gain at least $50 million because of its controlling curiosity about both companies.
“While this can be a great deal for the Shaw family, it is a bad deal for every Corus minority shareholder,” said Gabriel de Alba, Catalyst’s managing director and partner. “Catalyst has asked Corus a quick question on behalf of all shareholders, simply to be met with secrecy along with a steady stream of misleading information.”
De Alba said that “the rate at which they’re trying to proceed this transaction” is reason to be concerned. This deal was announced near to a month after Shaw decided to acquire Wind Mobile Corp. for $1.6 billion.
Corus also said Thursday that it is postponing its proposed high-yield debt offering “until market conditions improve.” Corus planned to raise up to $300 million in bonds to replace some of the other committed credit facilities related to the transaction, which still stay in place. Sources say that the text market was demanding terms with this offering that exceeded the amount Corus was willing to pay.
Class B shares of Corus fell 0.7 per cent Thursday to $9.87. Since Corus announced the acquisition on Jan. 13, its stock has plunged 16 percent and now trades at a 56 per cent discount to the 52-week high it reached last February. Its quarterly dividend of nine cents per share is yielding more than 11 per cent.
