Shaw-Corus Deal May Be No Slam Dunk

Shaw-Corus Deal May Be No Slam Dunk

Postby jon » Thu Feb 25, 2016 9:05 am

From this morning's Broadcast Dialogue:

The expected no-brainer approval process for the Corus Entertainment purchase of Shaw Media hasn’t
turned out that way. The CRTC approval process for the $2.65B purchase was seen as a simple
administrative process at first. But then the Commission issued a call for comments which resulted in 46
responses. Many of the respondents called for a public hearing because of the deal’s size. Others mentioned
tangible benefits. Earlier this week, Corus put out a news release announcing that independent proxy advisory
research firm, Institutional Shareholder Services (ISS), had recommended that Corus shareholders vote in
favour during a special meeting of shareholders to be held March 9. The ISS reported cautioned, however, that
Corus is taking on "a substantially greater amount of debt than it has maintained in the past," pushing its
leverage ratio beyond its target range. Catalyst Capital, a Corus investor, says its concerns are that:
— The Shaw family stands to gain between $50 million to $62 million from the transaction.
— Internal calculations of the fair market value for Shaw Media appear to be flawed; that Corus was
overpaying by $150-$200 million.
— A reverse break fee is in place (a penalty payable to Shaw if the deal doesn’t go through).
Corus denies all of the allegations, calling its transaction governance process “careful, diligent and thorough”
during the four-month negotiation process. Further, says Corus, an independent formal valuation and two
fairness opinions were obtained from leading financial institutions in support of a fair acquisition. Each
supported the terms of the acquisition. Because of the related-party nature of the transaction, a majority of
Corus’s minority shareholders must sign off...
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