Corus Entertainment acquires Shaw Media from Shaw Communications

On April 1, 2016, Corus Entertainment Inc. acquired the business of Shaw Media Inc. from Shaw Communications Inc. This acquisition more than doubled Corus’ size, creating a combined portfolio of brands that encompass 45 specialty television services, including leading women and lifestyle, kids, family and general entertainment brands; 15 conventional television channels; 39 radio stations; a global content business; book publishing; and a growing portfolio of digital assets. 

Corus paid a purchase price of $2.65 billion for Shaw Media, subject to certain post-closing adjustments, which was satisfied by Corus through a combination of $1.85 billion in cash and the issuance by Corus to Shaw of 71,364,853 Class B Shares (CJR.B – TSX) at an agreed value of $11.21 per share. Shaw is an “affiliate” of Corus within the meaning of applicable Canadian securities laws as a result of a majority of the voting securities of both Shaw and Corus being held, directly or indirectly, by JR Shaw through the Shaw Family Living Trust and its affiliates. As a result, the acquisition constituted a related party transaction for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (MI 61-101), requiring a formal valuation (which was provided by Barclays Capital Canada Inc.) and Corus minority shareholder approval. Each of Corus and Shaw struck independent special committees to, among other things, review and negotiate the terms of the acquisition. 

Following the calling of a special meeting of Corus shareholders to be held on March 9, 2016, The Catalyst Capital Group Inc. publicly announced its opposition to the acquisition and its intention of preventing the completion of the transaction. In addition to a public relations campaign comprising press releases and conference calls, Catalyst conducted a dissident proxy campaign in connection with the required shareholder approval of the transaction. Catalyst also made application to the Ontario Securities Commission (the OSC) seeking to delay the Corus shareholder meeting on the basis of alleged disclosure deficiencies in connection with the acquisition. Following two expedited hearings before a panel of three commissioners of the OSC, the panel denied Catalyst standing to bring a public interest jurisdiction application to the OSC under s. 127 of the Securities Act (Ontario).  

Following the OSC hearings, minority shareholder approval was obtained at the special meeting held on March 9, 2016, in accordance with the minority approval requirements of MI 61-101 and the requirements of the Toronto Stock Exchange. 

The acquisition was also subject to the approval of the Canadian Radio-television and Telecommunications Commission, which was received on March 23, 2016. 

The cash consideration for the acquisition, the related re-financing of existing indebtedness of Corus and the redemption of Corus’ 4.25 per cent senior unsecured notes due February 11, 2020 (the Senior Notes), of which $550 million principal (plus accrued and unpaid interest) was then outstanding, was financed through a combination of debt from increased credit facilities and equity from the net proceeds of an offering of subscription receipts. 

Equity Offering and Concurrent Private Placement 

In connection with the acquisition, on February 3, 2016, Corus completed a public equity offering of 25,400,000 subscription receipts of Corus at a price of $9.00 per subscription receipt, for gross proceeds of approximately $228,600,000. On February 5, 2016, the underwriters in the public offering exercised their option to purchase an additional 3,810,000 subscription receipts at a price of $9.00 per subscription receipt, for additional gross proceeds of approximately $34,290,000, representing total gross proceeds from the offering of $262,890,000. Concurrently with the closing of the public offering, on February 3, 2016, the Shaw family also purchased 3,560,000 subscription receipts on a private placement basis from Corus at a price of $9.00 per subscription receipt, for gross proceeds of $32,040,000. 

The Class B Shares underlying the subscription receipts were issued on April 1, 2016 in connection with the completion of the acquisition and the net proceeds from the public offering and the concurrent private placement (including accrued interest thereon) were applied by Corus to partially fund the cash consideration for the acquisition. 

Increased Credit Facilities 

In connection with the acquisition, Corus increased its syndicated senior secured credit facilities to the aggregate amount of $2.6 billion, consisting of a $2.3-billion term loan and a $300-million revolving credit facility, provided by RBC Capital Markets as lead bank together with a syndicate of other lenders pursuant to an amendment and restatement of Corus’ existing credit facilities as of April 1, 2016. The full amount of the term loan was drawn on closing to finance the acquisition. 

On April 1, 2016, Corus announced its intention to redeem all of its outstanding senior notes. 

Corus was represented internally by a team led by Gary Maavara, Executive Vice President and General Counsel that included Dale Hancocks, Vice President, Operations and Associate General Counsel, Production and Outbound Licensing; Jane Harrison, Vice President and Associate General Counsel, Inbound Rights and Affiliate Agreements; Randy Witten, Vice President and Associate General Counsel, Corporate; Sylvie Courtemanche, Associate General Counsel, Vice President, Government Relations and Compliance; and Janet Irons, Danielle Laflamme and Deborah Angel of the Corus Law Department. 

Corus was represented by Osler, Hoskin & Harcourt LLP in connection with the acquisition, the public offering of subscription receipts and the related private placement of subscription receipts with a team led by Doug Bryce that included James Brown, and Amelia Miao (acquisition), Desmond Lee and Robert Anton (subscription receipt offerings), Andrew MacDougall (corporate governance and proxy matters), Firoz Ahmed, Tim Hughes and David Davachi (tax), Larry Lowenstein, Mark Gelowitz, Shawn Irving, Evan Thomas, David Rankin and Karin Sachar (litigation). 

Corus was represented by Dentons Canada LLP in connection with its financing and note redemption with a team led by Bill Jenkins that included Stephanie Campbell, Barbara Farina, Alexandra North, Dan Shea, Gabrielle Motuz, Mike Tallim and Mark Kolapak. 

The Corus Special Committee was represented by Borden Ladner Gervais LLP, with a team led by Frank Callaghan that included Philippe Tardif

Corus was provided with regulatory advice by Grant Buchanan of McCarthy Tétrault LLP and Michelle Lally of Osler, Hoskin & Harcourt LLP

Shaw was represented internally by a team led by Peter Johnson, Executive Vice President & Chief Legal and Regulatory Officer that included Troy Moller, Assistant General Counsel, John Reynolds, Vice President and Assistant General Counsel, and Chris Pang, Corporate Counsel. 

Shaw was represented by Davies Ward Phillips & Vineberg LLP with a team led by Vincent Mercier that included Peter Hong, Brett Seifred and Evan Griffith (M&A), Andrea Burke and Matthew Milne-Smith (litigation), Elie Roth and Andrew Ellis (tax) and John Bodrug and Jim Dinning (regulatory). 

The Shaw Special Committee was represented by Goodmans LLP with a team led by Stephen Halperin and Jonathan Lampe that included Robert Vaux and Jamie van Diepen (corporate) and Monique McAlister (regulatory). 

The underwriters for the subscription receipt offerings were represented by McCarthy Tétrault LLP, with a team led by Andrew Parker that included David Badour and Suraj Rammohan (securities) and Patrick McCay and Doug Cannon (tax). 

The agent and the lenders for the Corus debt financings were represented by McCarthy Tétrault LLP, with a team led by Gordon Baird and Barry Ryan that included Lama Sabbagh, Damilola Katibi and Julian Ho (intellectual property) in Toronto and Gadi Taj Ndahumba and Jason Phelan in Montreal.

The Catalyst Capital Group Inc. was represented by Bennett Jones LLP with a team that included Rob Staley, Derek Bell, Jeff Kerbel, Kris Hanc and Jason Berall.