Investors gave a cold reception to the $548-million sale of Corus Entertainment Inc. stock, knocking back the stock price by 17 per cent on Wednesday, a day after Shaw Communications Inc. cut ties with the Toronto-based broadcaster.
Shaw announced late on Tuesday it sold its entire 36.8-per-cent stake in Corus to a syndicate of 13 investment banks led by TD Securities Inc., which in turn offered the stock to investors for $6.80 a share. The sale was priced at a 15.6-per-cent discount to the closing price of Corus stock on Tuesday, a larger cut in price than the 2-to-4 reduction typically seen on what are known as “bought deal” financings. Corus shares closed Wednesday at $6.70 on the Toronto Stock Exchange, down $1.39 from the previous session.
Investment banks pitched Corus shares to clients as a play on a recovery in television advertising, after the company used an investor presentation in late April to highlight a 5-per-cent increase in revenues from its networks and a 10-per-cent increase in profits from the TV division, which made $114-million in the most recent quarter. Corus owns the Global Television Network and a slate of specialty TV channels, such as Food Network Canada and HGTV Canada. BCE Inc., owner of rival network CTV, also talked up rising advertising sales at its TV properties as part of its most recent financial results.
Shaw sold its Corus shares as part of a strategic shift that is seeing the Calgary-based company focus on expanding its wireless and cable businesses. Shaw attempted to find a single buyer for the Corus stake last year, but was unsuccessful. On Wednesday, one banker working on the sale called it a clean up of Shaw’s most recent involvement in Toronto-based Corus.
Shaw acquired the Corus shares in 2016 as payment for broadcasting assets, including Global, sold by the telecom company. Shaw previously spun out Corus as an independent entity in 1999. Both companies are controlled by the Shaw family.
Corus shares are relatively thinly traded and the 81 million shares sold on Tuesday represent approximately 80 days of the company’s average turnover on the Toronto Stock Exchange. Sources working on the transaction, to whom The Globe and Mail granted anonymity because the deal has not closed, said Corus has a relatively large following among individual shareholders and reaching out to these investors means the sales process is expected to take several days.
While Corus stock is trading below the price of the offering, the investment banks still stand to make a profit on the transaction, as there is a $22-million fee on the transaction, or 27 cents a share. This commission means Corus’s share price would need to fall below $6.53 before the banks lose money on the deal.
Shaw’s decision to unload its stake in Corus is the latest in a series of what are known as secondary share offerings from long-time backers exiting public companies. In March, the founder of Northland Power Inc. sold a $750-million stake in the company, after Northland shut down a strategic review the previous year without finding a buyer for the company. In addition, a private-equity fund recently sold a $437-million stake in retailer Aritzia LP and a foreign real estate company raised $1.2-billion by selling the bulk of its holding in First Capital Realty Inc.