Bell Media, Canada’s largest television broadcaster, is getting even bigger by acquiring two French-language services from its closest English-language competitor.
Bell and Corus Entertainment announced Tuesday that they have a deal whereby Bell acquires Séries+ and Historia for a price Corus values at about $200 million, subject to closing costs.
The deal requires approval by the Competition Bureau and the Canadian Radio-television and Telecommunications Commission.
That could be difficult, because of the history of the two services. The two were launched in 2000 as a joint venture between Astral Media and Alliance Atlantis. Alliance was then bought by Canwest, then Canwest’s television assets were bought by Shaw. Astral held on to its half of the ownership stake until it was bought by Bell in 2013. As part of its (second) proposal for the acquisition, Bell and Shaw each agreed to sell their half of Séries+ and Historia to Corus.
Now Bell wants to buy it all back. And at a discount, too. When Corus bought them in 2013, each half was valued at about $140 million, for a total price of $280 million. This transaction would be a savings of 29%. PBIT earnings for Historia and Séries+ were $29,881,221 in 2013 and $21,427,553, or a 28% decrease. The change was due mainly to a sudden surge in Séries+’s programming expenses in 2015-16 and a slow decline in ad revenue for both channels.
Corus is selling primarily to cut down its debt, as it says in its statement, but also because the channels are “not core to advancing Corus’s strategic priorities at this time.” The main reason for that is language. Other than these channels, Corus’s only French-language assets are the bilingual channels Teletoon and Disney.
“In the 18 months since Corus acquired Shaw Media, we have demonstrated a resolute commitment to de-lever our balance sheet to 3.5 times net debt to segment profit by the end of fiscal 2017 and 3.0 times by the end of fiscal 2018,” said Doug Murphy, President and Chief Executive Officer. “We have successfully accomplished the first step in our journey through the disciplined execution of our integration plan and ongoing advancement of our strategic priorities in fiscal 2017. 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 was embroiled in controversy recently after news came out that Séries+ and Historia would no longer be commissioning original series. It’s unclear if that decision was made in anticipation of this announcement (La Presse first reported on Corus negotiating this deal back in May 2016). Corus remains in control of the channels until the deal is closed, which Bell predicts will happen in mid-2018.
From Bell’s statement:
“The addition of Séries+ and Historia perfectly complements our broad slate of French-language channels, further enhancing our competitiveness in the vibrant Québec media landscape,” said Randy Lennox, President, Bell Media. “We look forward to taking Séries+ and Historia further than ever before, reinforcing our commitment to invest and grow in Québec, and deliver even more opportunities for francophone viewers, producers, and advertisers.”
“Bell Media has had a proven track record of investing in original French-language production, commissioning over 530 original productions from more than 70 francophone producers, and representing nearly 2,700 hours of new programming,” said Gerry Frappier, Bell Media’s President, French-language TV and RDS. “Now with the addition of Séries+ and Historia, we look forward to bolstering our commitment to both francophone viewers and the Québec television production community even more.”
The CRTC’s common ownership policy says generally that deals where a company gets control of more than 35% of the viewing share will be reviewed to determine if it’s in the public interest, and anything higher than 45% would generally be denied. According to the CRTC’s latest Communications Monitoring Report, Bell’s English-language services represent about 37% of viewing hours outside Quebec’s francophone market, and 21% in the Quebec francophone market. Corus’s French-language services (which also include Teletoon) represent only 0.4% of Quebec francophone viewing share. So mathematically, the deal would seem to meet the CRTC’s criteria for approval.
But expect those who came out against the Bell-Astral deal, particularly Quebecor, Cogeco and Telus, to argue that this deal calls into question the integrity of the CRTC’s 2013 decision and that it should be denied as being against the public interest.
Since this is a change in ownership, the deal would also be subject to the CRTC’s tangible benefits policy, which requires 10% of the value of television ownership transactions be spent on funds and projects that benefit the broadcasting system. Under this policy, Bell would be expected to spend $20 million on new projects over the next seven years. No tangible benefits proposal has been released yet, but will become public when the CRTC publishes the application for change in ownership.