Shaw Stacks Deck with CanWest Purchase

by Jordan Richardson on May 4, 2010

Shaw Communications has been making some big moves lately to position itself as a key telecommunications competitor in Canada. With the purchase of CanWest Global Communications Corp. assets, Shaw has solidified itself along with Rogers Communications Inc. and CTVglobemedia as a Canadian media giant.

Some analysts are questioning the bold move, noting that a lot of today’s content is moving away from traditional networks and towards the internet.

CEO Jim Shaw was confident, however, telling analysts on a conference call that he believed his company to be a “leader in forward thinking in Canada.”

Shaw purchased the assets from New York investment firm Goldman Sachs and now owns 11 Global TV stations along with a profitable group of specialty channels, including the Food Network and Showcase. The deal will add around $900 million in revenue each year for Shaw.

As I discussed yesterday, telecommunications companies are dipping into all sorts of different media sectors. Rogers owns the City-TV network along with SportsNet and a pile of radio stations and magazines. BCE Inc. holds 15% of CTVglobemedia.

With the company’s recent announcement of finally getting into the wireless sector, it’s clear that Jim Shaw’s baby is gearing up to take on the telecommunications power structure.

Shaw announced on Monday that it had paid $700 million to Goldman Sachs in cash for its 65% in the CanWest channels. CanWest’s creditors will now receive $478 million in cash as a sort of “compromise payment” on its debts. Shaw will then assume $815 million of the net debt. The deal doesn’t impact Shaw’s own debt rating.

As reported in The Star, the “deal must still be approved by CanWest’s creditors, by the court and two regulatory agencies, the Canadian Radio-television and Telecommunications Commission and the federal Competition Bureau.”

Another angle here is that this purchase could provide some investors with pause. Desjardins Securities analyst Maher Yaghi was far from upbeat about the deal. “Investors may question Shaw’s paying such a high multiple for CanWest given the company is now reinvesting its cash flows in media, which may not earn as high a return as its core cable business,” he said. Yaghi put a “hold” recommendation on Shaw stock.

This acquisition by Shaw certainly modifies the media landscape in Canada. It absolutely stacks Shaw’s deck in terms of taking on the telecommunications companies, especially if Shaw continues to press on in the wireless sector as well.

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August 13, 2012 at 12:20 pm

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