Corus slams Catalyst Capital claims regarding Shaw deal

Corus Entertainment has released a statement characterizing claims outlined in a recent media report as "deeply misleading."

Corus QuayCorus Entertainment has called claims from minority shareholder Catalyst Capital Group outlined in a recent media report as “deeply misleading,” including refuting allegations that the Shaw family stands to gain between $50 million to $62 million from the transaction.

An article published by the Financial Post Tuesday indicated Toronto-based private equity firm Catalyst Capital Group had filed letters with the Ontario Securities Commission and the Toronto Stock Exchange Friday, asking the regulators to review whether enough information has been disclosed publicly to allow minority stakeholders to make an informed decision about the $2.65 billion deal.

“Based on Corus’ own prior disclosure, the deal is dilutive, not accretive, unless one assumes away facts such as having to pay for debt. Catalyst is also concerned that the special committee was not formed ahead of the deal, and? that the income and EBITDA were inflated to support a misleading transaction multiple  [7.7x],” said Catalyst Capital managing director Gabriel de Alba in a statement sent to Playback Wednesday morning.

In a statement released Tuesday afternoon, Corus said it was looking to “correct a number of misstatements and inaccuracies” relating to Catalyst’ allegations that were outlined in the Financial Post report. Significantly, Catalyst alleged the Shaw family stands to gain between $50 to $62 million from the transaction, a claim Corus characterized as “unfounded.”

Catalyst has also alleged the Shaw family has gained $40 million from fluctuations in trading prices of Corus and Shaw shares on the TSX following the announcement of the deal. Corus noted in its statement that the family “obviously… cannot predict, nor is responsible for, market fluctuations in the share prices of the two companies.”

The statement also refuted claims by Catalyst that Corus was overpaying for Shaw Media. In its statement, Corus indicated Catalyst had said in a Feb. 16 meeting that it had calculated that Corus was overpaying for Shaw Media by $150 to $200 million. The Financial Post story released Tuesday indicated Catalyst had since calculated Corus is overpaying for Shaw by an estimated $400 million to $600 million.

“Corus is confident in the independent formal valuation and fairness opinion provided by Barclays Capital Canada Inc., which determined the fair market value for Shaw Media to be in the range of $2.45-$2.85 billion, based on extensive analysis including discounted cash flow analysis and comparable precedent transactions in the broadcasting sector in Canada and the United States,” Corus said in its statement.

Corus also said it “stands behind both the robust process and the extensive disclosure provided to shareholders in related to the acquisition.” The statement points to a special committee of independent directors that was established to assess and oversee the merits of the deal. On Monday, Corus also issued a separate report from an independent firm Independent Shareholder Services, which recommended shareholders vote for the deal, as “on balance…the benefits of the transaction appear to reasonably outweigh the costs.”

The sparring between Catalyst and Corus Entertainment comes about two weeks before a March 9 shareholders meeting where a vote will take place on the Shaw Media acquisition. In order for the deal to go forward, it must be supported by a majority of the minority shareholders. It is also subjected to regulatory appeal.

Neither the Ontario Security Commission nor the Toronto Stock Exchange would confirm the receipt of a letter from Catalyst Capital regarding the Shaw/Corus deal.