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A syndicate of investment banks is expected to lose tens of millions of dollars after repricing a secondary offering of Corus Entertainment shares due to lower-than-expected demand.

The syndicate of underwriters, led by TD Securities, has repriced the offering of Class B Corus shares to $6.25 each, down from $6.80, according to people familiar with the matter and documents obtained by The Globe and Mail.

The estimated hit to all of the banks in the syndicate is expected to be roughly $24-million, according to a source familiar with the matter, an unusually large loss for a bought deal. The estimated loss to TD Securities is roughly $7-million.

The original deal size was expected to be 80.6 million shares for total proceeds of around $548-million, but roughly two-thirds of the deal didn’t sell, according to sources, to whom The Globe granted anonymity because they are not authorized to speak publicly about the matter.

Shaw Communications Inc. announced a deal on May 14 to sell its 38.6-per-cent stake in Corus to the syndicate after struggling to sell the position to a single buyer last year. The deal was priced at $6.80 per Class B share, representing an unusually large 15.6-per-cent discount to Corus’s closing price. Typically, such bought deals are sold at a discount of between 2 per cent to 4 per cent. In a bought-deal arrangement, members of the syndicate buy the shares in order to resell them to various investors and earn a commission, but they take the risk that weak demand could leave them stuck with unwanted shares and losses.

Corus owns the Global Television Network as well as a number of specialty television channels such as HGTV Canada and Food Network Canada.

Other banks in the syndicate include CIBC World Markets and RBC Dominion Securities, with each representing 12.5 per cent of the deal, and Scotia Capital, BMO Nesbitt Burns and National Bank Financial at 5 per cent each. Spokespeople for TD Securities, National Bank, CIBC and Scotiabank declined to comment and other banks in the syndicate could not immediately be reached for comment.

The Corus shares proved difficult to sell because investors are skeptical about the outlook for TV advertising spending, a key element of the broadcaster’s future revenue, according to investment bankers working on the transaction. There were also concerns about buying into a media company when Shaw, a long-standing player in sector, is exiting.

TD Securities hopes that repricing the shares at a lower level will boost demand from both institutional and retail investors, according to a document obtained by The Globe. But if that demand fails to materialize, TD could be left with millions of shares, according to the document.

Shaw Communications will not be affected as it has already received $6.80 a share for its Corus stake.

Losses of this magnitude are rare on Bay Street, but they have been seen before. In one instance, in 2015, when a $1-billion bought deal for Silver Wheaton failed to sell, estimates pegged losses suffered by Scotia Capital, the lead underwriter, at between $5-million and $10-million.

Investment banks pitched Corus shares to clients as a play on a recovery in television advertising. 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.

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 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.

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