Corus focuses on content over broadcast with Historia, Séries+ sale

Corus Entertainment Inc. announced Tuesday it is selling two French-language specialty channels, Historia and Séries+, to BCE Inc.’s Bell Media in a deal valued at approximately $200 million that prompted favourable reactions from financial analysts. “As we reviewed our portfolio of assets this year, we determined that while Historia and Séries+ are excellent channels, they are not core to advancing Corus’ strategic priorities at this time. Furthermore, the increased financial flexibility this transaction provides will enable Corus to accelerate our transformation into an industry-leading integrated media and content company,” Corus president and CEO Doug Murphy said in the release. In a research note, Canaccord Genuity analyst Aravinda Galappatthige said the deal “supports our position of the growing importance of content.” He said Corus’ long-term objective should be to “shift its asset mix towards content and reduce its exposure to declining broadcaster (subscriber/advertising) revenue streams.” The sale of the two channels “puts the company in a better position to participate in potential opportunities on the content side,” he added. Bell Media, on the other hand, “will be able to drive both revenue and cost synergies from the acquisition,” he predicted. That’s because it already has a significant number of French-language channels following its acquisition of Astral in 2013, Galappatthige said, noting that Bell was actually required to divest Séries+ and Historia as a condition of that transaction. “We will be looking for greater clarity on the regulatory front,” he added. During a conference call with analysts following the release of Corus’ fourth-quarter results Wednesday, Murphy was asked about whether he expects regulators to be more open to consolidation in television and media. Murphy noted that there is now a new chairman at the CRTC and that the business is changing, with the growth of over-the-top (OTT) players. “That’s clearly a new development that’s got to be taken into consideration as we look at consolidation.. And furthermore… everything’s on the table. So I think the tone needs to be reflective of the fact that Canadian domicile media business needs to be vibrant, we need to be able to operate with our strategic priorities firmly in hand and asset moves like this clearly are beneficial to the system and in that regard we’re of the view it will be favourably reviewed in Ottawa,” he said. However, Cormark Securities analyst David McFadgen said he believes the deal, which is a good value, occurred because “Corus was forced to sell these assets once Shaw decided to take all cash dividends for its shares raising Corus’ annual cash dividend payment to an estimated $200 range.” Making the required payments from its free cash flow would be “tight” for the company, he added. McFadgen also said in the Thursday note the deal could see some roadblocks at the CRTC, though he expects those to be minor. “The CRTC typically aims to ensure no single player has more than 35 control of a market. Post the sale, Bell Media is likely to increase market share in French from 22 to 27 , so we believe the deal will be approved.” He expects the deal will close at the end of the fourth quarter of 2018. Desjardins Capital Markets analyst Maher Yaghi said in a note that the sale was “strategically sound,” given Corus “lacked sufficient scale in French-language TV or radio to optimize advertising sales from these channels.” According to CRTC data, Historia’s revenues in fiscal 2016 stood at $20.7 million while Séries+ had revenues of $29 million, National Bank analyst Adam Shine said in a research note. In a separate press release, Bell Media noted that Séries+ is the most-watched fiction channel in Quebec. Bell Media president Randy Lennox said in the release it “perfectly complements our broad slate of French-language channels, further enhancing our competitiveness in the vibrant Québec media landscape.” During the conference call, Murphy said that the company hopes to see growth when it comes to international content sales in 2018. “We have, as you’ve seen, a robust slate at Nelvana with great partners and we expect that to grow on a consistent basis for the future. We have now subsequent seasons of shows on our Corus Studios lifestyle content slate, Masters of Flip, Buying the View, Getting Home to Win," which are getting different seasons picked up in up to 70 different territories, he said. “Those property shows really work for broadcasters worldwide. So we’ve definitely hit a nerve there, which we’re encouraged about,” he said, adding the company is also seeing “lots of interesting inbound inquiries from both Canadian content producers and creators but also international partners.” Murphy added: “So we’re now exploring opportunities potentially in the scripted drama area in partnership with other folks… our specialty services are organized around kids, lifestyle and scripted, and our future content aspirations will be similarly organized around those, although in some aspects we may be completely owning the content like with Nelvana. In other cases, we may decide to partner with companies.” RBC Capital Markets analyst Drew McReynolds said in a note that in “a challenging advertising market, we expect Corus to increasingly lean on content and ad tech to drive revenue growth.” Corus reported revenues of $381.2 million for the three months ended on Aug 31, down slightly from the $384.5 million in revenue it earned a year earlier. Its TV profits for the fourth quarter stood at $107.3 million, up slightly from $106.8 million, while radio profits fell from $8.5 million to $8.3 million over that time. Overall net income for the period was $35.7 million, up from $8.5 million. The results marked a full year since the first quarterly report to include Shaw Media, which Corus acquired from Shaw Communications Inc. a year ago. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Ahmad Hathout at ahathout@thewirereport.ca

Corus focuses on content over broadcast with Historia, Séries+ sale

News | 10/18/2017 6:16 pm EDT

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