It’s being eclipsed by some other Quebec media ownership news, but Quebecor announced today at its annual shareholders meeting that it is completing its buyback of shares in subsidiary Quebecor Media owned by Quebec’s pension fund manager, the Caisse de dépôt et placement du Québec. Once that sale is complete, Quebecor Media, a company started in 2000 with the Caisse’s help to purchase Videotron (and keep it out of the hands of Rogers) will be completely owned by Quebecor Inc.
The transaction won’t completely eliminate the Caisse’s investment in Quebecor. Some of the $1.69 billion the Caisse is getting is in the form of Quebecor Inc. stock, and the Caisse already has some Quebecor stock from previous deals and investments (its 2017 annual report put the value at between $300 million and $500 million). But getting the Caisse out of Quebecor Media simplifies the situation and means Quebecor can decide what to do with Quebecor Media’s profits and the Caisse becomes just another shareholder.
Through his family’s voting shares, Quebecor is de facto controlled by Pierre Karl Péladeau, who controls 73% of voting power in Quebecor Inc.
Whether the Caisse’s $3.2-billion investment in Quebecor Media was the right one is the subject of some debate. In pure dollar amounts, the Caisse is getting back more money than it invested, but barely keeping pace with inflation if it even did. Had the money been invested otherwise, it may have brought back more. On the other hand, Videotron and TVA might be owned by Rogers now, and it’s hard to predict what the Canadian media industry would have looked like as a result.
- 2000: The Caisse de dépôt et placement du Québec buys a 45.3% stake in Quebecor Media for $3.2 billion to finance the purchase of Videotron (which also owned TVA). Quebecor Media is valued at $7.06 billion.
- 2012: Quebecor reduces Caisse’s stake from 45.3% to 24.6% in $1.5-billion deal ($1 billion in cash from Quebecor Media and $500 million in shares of Quebecor). The full 45.3% stake is valued at $2.75 billion, and so Quebecor Media as a whole is valued at $6.07 billion. The Caisse’s remaining share is valued at $1.5 billion, and the Caisse notes it has received $324 million in dividends since 2003.
- 2015: Quebecor reduces the Caisse’s stake from 24.6% to 18.93% for $500 million in cash. This would value Quebecor Media at $8.8 billion and the Caisse’s remaining stake at $1.67 billion. Quebecor promises to buy back the rest of the Caisse’s interest by 2019.
- 2017: Quebecor further reduces the Caisse’s stake from 18.93% to 18.47%, buying $38 million worth of shares in cash. This would value Quebecor Media at $8.3 billion and the Caisse’s remaining stake at $1.53 billion.
- 2018: Quebecor completes the repurchase of the Caisse stake, buying the remaining 18.47% of shares for $1.69 billion (91.1% cash, 8.9% Quebecor stock). This values Quebecor Media at $9.15 billion.
In total, just in terms of share value and not counting for inflation or dividends, the Caisse invested $3.2 billion in 2000 and over the various buybacks got $3.7 billion. (According to the Globe and Mail, the total payback is estimated around $4.1 billion.)
In terms of inflation, that $3.2 billion should have been worth $4.1 billion in 2012 and $4.5 billion today. $3.2 billion in the S&P/TSX composite would have been worth $4.8 billion.
I’m not a stock market expert and I’m not going to do a full analysis here. Maybe someone else has the time and patience to consider all the variables (and someone from Quebecor will spend time refuting those conclusions), but the debate is mostly moot now, because the Caisse’s (direct) investment in Quebecor Media has been liquidated.