Shaw Communications is selling its media division to Corus Entertainment for $2.65 billion, dividing the Shaw telecom empire into separate media and network companies. The sale of the media division will help Shaw fund its $1.6-billion purchase of Wind Mobile, announced in December, and positions the Calgary-based cable, internet and satellite TV company to better compete with its rivals as it moves into the wireless market with its acquisition of Wind Mobile and its 940,000 customers forming the fourth major wireless company in Canada.
The sale comes at a time when the Canadian media industry is facing an uncertain future as a looming CRTC-mandated change will give customers more control over which channels are included in their TV packages and traditional media faces increasing competition from digital alternatives.
With the previously announced acquisition of Wind and sale of Shaw Media, Shaw will be focused on delivering consumer and small business broadband communications supported by its best-in-class wireline, WiFi and wireless infrastructure, Shaw Communications CEO Brad Shaw said in a statement.
Corus will add the Global Television network — including Global TV stations in Calgary, Edmonton and Lethbridge — and 19 specialty channels including HGTV Canada, Food Network Canada and Showcase to its portfolio, which already includes a number of other specialty TV channels as well as a network of 39 radio stations — including CKRY at 93.3FM and CFGQ at 100.1 FM in Banff, CHQR at 770 AM, CKRY at 105.1 FM, CFGQ-FM at 107.3 FM in Calgary, CHED at 630 AM, CHQT at 880 AM, CKNG at 92.5 FM and CISN at 103.9 FM in Edmonton — along with the Nelvana animation studio.
Shaw Communications will become a large shareholder in Corus as a result of the deal, which involves both cash and shares. Both Corus, which was spun off from Shaw in 1999, and Shaw Communications, are controlled by the Shaw family.
New CRTC rules come into effect in March after which Canadian TV subscribers will be able to pick individual channels to add to their subscriptions on an a la carte basis, or in small packages that they design themselves.That could mean a lot less revenue for the less popular specialty channels, which have until now been supported by their inclusion in packaged bundles from the TV providers. At the same time, traditional media producers are facing increasing competition from online content and digital alternatives.
The sale of Shaw Media to Toronto-based Corus will move about $1.85 billion in cash to Shaw Communications, which will also receive about 71 million Corus shares representing about 39 per cent of the company.
With changes coming that will allow customers to select which individual channels they want to buy, and broader questions looming about the performance of the media industry in an increasingly digital world, many analysts believes it makes business sense to focus one company on distribution and the other on producing the content for distribution.
Once the deal is concluded, Corus will have a comparable share of English TV viewership to Bell, with each of them accounting for slightly more than a third of what Canadians watch on television. Corus would own the top six highest-rated specialty channels among women, as well as highly rated children’s entertainment including the Disney channels and Nickelodeon.
The sale will enable Corus the scale to compete head on with larger broadcasting rivals and with fast growing streamed content providers including Netflix and allows Shaw Media to focus on expanding its footprint as Canada’s fourth national wireless service provider with a view to wresting market share from leading incumbents, notably western rival Telus. Telus has eaten into Shaw’s whole-home market share since its acquisition of Clearnet in 2000, providing wireless, wireline, television and internet service forcing Shaw into a defensive position.
Now we’re on the same page, we’re at the same level,” said Brad Shaw in an interview with Globe & Mail, “…and we’ve improved our competitive position in Western Canada just by doing this deal, let alone the opportunity in the East.
Shaw will retain its interest in the Shomi streaming video service, a joint venture with Toronto-based Rogers Communications.
The deal stands to produce up to $50 million in operating cost efficiencies and could signal layoffs and the divestiture of under performing specialty channels over the next year or two, analysts said.
According to Corus executives, because the deal doesn’t involve a change in ownership, they don’t anticipate any issues with the CRTC, the Competition Bureau or the federal government.
The deal is expected to close by May 31, pending approval by regulators and Corus shareholders. The Wind deal is also expected to be closed by about the same time