SPOTLIGHT: Corus Entertainment (No. 83)
When Shaw Communications President Jim Shaw and Shaw Media president John Cassaday climbed on-stage in September, 1998, and unveiled plans for two "pure play" operating groups--one strictly cable television and the other to house Shaw's radio and specialty TV assets--Bay Street analysts demurely applauded.
The two men were a study in contrasts, with Alberta-raised Shaw playing up the burly cowboy, and Burlington, Ont.-raised Cassaday, the urban gentleman. The presentation in Toronto's News Theatre featured snazzy graphics that detailed how the spinoff would streamline operations and make the companies easier for investors to understand and value. Cassaday, who had quit almost a year earlier as president of CTV Television after eight years, told the rapt crowd that the new venture was going to be one of the biggest entertainment companies in Canada, focusing on kids' programming and music. The split also assuaged the Canadian Radio-television and Telecommunications Commission's concerns about cable companies owning broadcasting assets and potentially playing favourites with their own services. (Under a ruling issued in June, the CRTC will now allow cable companies to own specialty and pay-TV channels directly.)
After the press conference, Cassaday quoted a line from the film Jerry Maguire to clarify his company's strategy. "'Help me, help you' is how we're approaching the commission," he said. The company soon secured stamps of approval from Revenue Canada and the CRTC.
The company was christened Corus Entertainment Inc., with a stable of assets that included 14 radio stations, six specialty networks, including YTV and Country Music Television, and the DMX digital music service. Corus had also just picked up two specialty channels and 12 radio stations from WIC Western International Communications Ltd.
Shaw launched Corus with a $600-million credit facility, and Cassaday, now 48, took off on an acquisitions tear. He has completed about 10 deals, worth about $1.5 billion. Corus now has 49 AM and FM radio stations in major Canadian markets.
Corus has also acquired additional stakes in several cable channels, including Teletoon and The Comedy Network. Last September, Corus bought one of Canada's leading animation companies, Toronto-based Nelvana Ltd., for $554 million. With that came a library of cartoon classics, including Babar and Rupert. In May, Corus bought a 10% stake in Montreal-based Astral Media Inc., owner of The Movie Network and the Family Channel, for $110 million.
By and large, the Street has praised the deceptively easygoing Cassaday. Sure, he's often paid top dollar for acquisitions. But the biggest focus is still kids' programming and music. He has the advantage of stable ownership. The Shaw family still has 77.3% voting control of Corus, which debuted on the Toronto Stock Exchange in September, 1999, at $18.50 a share and hit $48 last year. More recently, it's settled near $35.
Part of that decline is due to an overall drop in the shares of media conglomerates. But some analysts say Corus may be taking on too much. They point to the $205-million acquisition last March of the women's cable channel WTN from Moffatt Communications Ltd., owned by Shaw. "Corus is extremely well positioned in its core markets," says Tim Casey, a managing director with BMO Nesbitt Burns. "However, there is some concern in the market that the level of acquisition activity over the past 18 months may have stretched Corus's focus."
Cassaday, who cut his teeth as president of the Canadian and then British divisions of Campbell Soup Co., says he still has his eye on the ball. First, radio and specialty TV in Canada. "Then," he says, "my plan has always been to expand internationally, leveraging our core expertise in kids and music."
Cassaday was thrilled by the CRTC ruling in June, and it touched off renewed speculation that Astral Media, Alliance Atlantis Communications Inc. and CHUM Ltd. may soon be in play.
Corus's debt at the end of this fiscal year will be about $560 million to $600 million, twice the level a year ago. "That's fine," insists Cassaday, who says that it's at a comfortable level for the industry. "Our bank covenants allow us to go well beyond that," he adds. "We're very conservatively managing our balance sheet."
At its year end of Aug. 31, Corus posted a profit of $156 million, including a one-time gain of $140 million from asset sales. Revenue was $238.7 million. Cassaday aims to generate $1 billion in revenue by 2005. Corus can now focus on digesting its acquisitions, while Cassaday keeps searching for new opportunities. "One of our biggest challenges," he says "is to make sure we continue this incredible momentum and deliver the results we've promised." Corus Entertainment Inc.
2000 Revenue 2000 Profit CEO $238.7 million $156-million John Cassaday