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Prime Minister Justin Trudeau joins Shahrzad Rafati CEO of BroadbandTV Corp as they take part in a panel discussion at the Business Women Leaders Taskforce forum on the sidelines of the G20 Summit in Buenos Aires, Argentina on Nov. 29, 2018.Sean Kilpatrick/The Canadian Press

One of Canada’s most successful female technology entrepreneurs, Shahrzad Rafati, is attempting to take her BroadbandTV Corp. public on the Toronto Stock Exchange and buy out the subsidiary of media giant Bertelsmann SE & Co. KGaA that controls the company.

This week, holding company BBTV Holdings Inc. – which owns about 49 per cent of Vancouver-based Broadband TV and counts Ms. Rafati and entrepreneur Hamed Shahbazi as directors – filed confidentially with Canadian regulators to go public, sources said. The Globe is not identifying the sources, who are not authorized to speak on the matter.

The sources said BBTV is aiming to raise $170-million in the offering, which is being led by Canaccord Genuity and Scotia Capital. That would give BBTV enough to buy out Luxembourg-based RTL Group SA, a publicly traded unit of Bertelsmann and owner of 51 per cent of BroadbandTV, under a tentative deal between shareholders. BBTV would then own BroadbandTV outright. To prepare for the offering, BBTV hired U.S. advertising technology executive Todd Tappin as chief financial officer. BroadbandTV declined to comment.

BroadbandTV is a digital platform that helps video creators make more money from advertising that runs with their content on online channels such as YouTube, Apple, Facebook, Pandora and Snapchat than if they posted it themselves. With the collective heft of its platform, BroadbandTV -- which says it is the second-largest online video purveyor in the world, behind only Google -- sells aggregated content to advertisers in package deals, while helping the video makers reach their target audience.

Broadband videos had 245 billion online views in the first half of the year, up 8.9 per cent year-over-year, according to RTL.

Ms. Rafati founded BroadbandTV in 2005, early in the internet video boom, nine years after moving to Canada from her native Iran to study computer science engineering. The company got its big break in 2009 when it signed the National Basketball Association as a client. RTL bought its stake in 2013 for $36-million.

The BroadbandTV chief executive officer became a prominent business figure, featured on magazine covers and panels at the World Economic Forum, and winning an entrepreneur of the year award. In 2018, Prime Minister Justin Trudeau appointed her Canada’s representative on the G20 Business Women Leaders' Task Force. Deloitte named BroadbandTV North America’s 257th fastest-growing tech company in 2019.

Cracks appeared in the relationship with RTL after the conglomerate declined to exercise its right by a January, 2017, deadline to buy out minority shareholders. At the time, Ms. Rafati said her company was “definitely” worth $1-billion, after two deals valued BroadbandTV rivals at more than US$500-million. But RTL chose not to pay the amount determined in a fair market value assessment.

That meant minority shareholders could drag RTL’s stake into a deal for all of BroadbandTV. The right expired in April, although RTL spokesman Oliver Fahlbusch said his company is “working constructively with the minority find the best strategic outcome.”

The sources said the minority shareholders struck a deal to buy out RTL at nearly $160-million for its 51 per cent stake, then hired advisers last year to raise the funds. But the sources said “crossover” investors, who back both public and private companies, indicated a preference to buy into Broadband as a public company.

One sticking point appears to be valuation. Confidential documents for prospective investors viewed by The Globe say BroadbandTV generated $335-million in revenue in 2018 and $370-million in the 12 months ended June 30, 2019. RTL’s public filings say the division’s revenues grew by 11 per cent in 2019 over 2018 levels, and by 6.5 per cent in the first six months of 2020 year-over-year. The company has told investors it generated an operating profit starting in 2018.

However, more than 70 per cent of BroadbandTV revenue represents money generated from advertising earned from videos it places on online channels, the confidential documents show. After the channels and creators get their cut, BroadbandTV gets less than 10 per cent. That means Broadband’s net revenue, after others get their cut, is closer to $40-million.

BroadbandTV does earn a much higher gross margin – more than 30 per cent - selling “value-added” services to creators, such as rights management, direct ad campaigns and mobile app creation, but that business, which BroadbandTV says it is trying to expand, accounts for less than 30 per cent of its revenues.

Given the mix of revenues and the fact that its pace of growth has slowed in recent years, investors weren’t willing to value the company privately at the same level as the RTL buyout deal, or more than $300-million, the sources said.

However, several encouraged Ms. Rafati to take BroadbandTV public. Investors have shown huge appetite for tech stocks during the pandemic, driving many to all-time highs, bidding up new Canadian issues, including Nuvei Corp., and prompting some Canadian tech entrepreneurs to consider going public. At the same time, some observers warn the market is overvalued.

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