Investors coldly welcomed the sale of $ 548 million in shares of Corus Entertainment Inc., bringing the share price back by 17% on Wednesday, a day after Shaw Communications Inc. had cut bridges with Toronto's broadcaster.
Shaw announced yesterday that it sold the entire 36.8 percent stake in Corus to a pool of 13 investment banks led by TD Securities Inc., which in turn offered the stock to investors for $ 6.80 per share. The sale was discounted with a 15.6 percent discount on the closing price of Corus shares on Tuesday, a higher price cut compared to the reduction from 2 to 4, generally seen on what are known as "bought bargain" loans . Corus shares closed Wednesday at $ 6.70 on the Toronto Stock Exchange, down $ 1.39 from the previous session.
The investment banks have launched Corus shares as a game for a television advertising resumption, after the company used an investor presentation in late April to highlight a 5% increase in its network revenues and an increase of 10% % in profits from the TV division, which earned $ 114 million in the most recent quarter. Corus owns the global television network and a series of specialized TV channels, such as Food Network Canada and HGTV Canada. BCE Inc., owner of the competing CTV network, also spoke of the growing advertising sales at its television properties as part of its most recent financial results.
Shaw sold his Corus shares as part of a strategic change that is seeing the Calgary company focus on expanding its wireless and cable business. Shaw attempted to find a single buyer for the Corus stake last year, but he was unsuccessful. On Wednesday, a sales banker called it a cleanup of Shaw's most recent involvement in Toronto's Corus.
Shaw purchased Corus shares in 2016 as payment for broadcasting activities, including Global, sold by the telecommunications company. Previously Shaw had split Corus as an independent entity in 1999. Both companies are controlled by the Shaw family.
Corus shares are traded relatively undervalued and the 81 million shares sold on Tuesday represent around 80 days of the company's average turnover on the Toronto Stock Exchange. The sources working on the transaction, to which The Globe and Mail granted anonymity because the agreement was not closed, stated that Corus has a relatively large following among individual shareholders and that reaching these investors means that the sales process will take several days.
While Corus' shares are trading below the offer price, investment banks are still able to make a profit on the transaction, as there is a commission of $ 22 million on the transaction, or 27 cents per action. This commission means that the share price of Corus should fall below $ 6.53 before the banks lose money on the deal.
Shaw's decision to download his stake in Corus is the latest in a series of what are known as secondary stock offers from long-time supporters coming out of public companies. In March, the founder of Northland Power Inc. sold a $ 750 million stake in the company after Northland closed a strategic review the previous year without finding a buyer for the company. In addition, a private equity fund recently sold a $ 437 million stake in Aritzia LP retailer and a foreign real estate company raised $ 1.2 billion selling most of its stake in First Capital Realty Inc.