Canada's Shaw Communications sells media arm to Corus for C$2.65 billion

TORONTO (Reuters) - Canada’s Shaw Communications Inc said on Wednesday that it would sell its media unit to Corus Entertainment Inc for C$2.65 billion ($1.9 billion), gaining funding for its Wind Mobile purchase and sending its shares up nearly 7 percent.

The Shaw logo is pictured on their Barlow Trail building, home to the annual Shaw AGM, in Calgary, Alberta January 14, 2014. REUTERS/Todd Korol

Corus, which operates a network of Canadian radio stations and prominent children’s television channels including YTV, Nickelodeon and Cartoon Network, will add channels like National Geographic, Food Network Canada, and HGTV Canada, boosting its family entertainment offerings.

Corus, which was spun off from Shaw more than 15 years ago will also be acquiring the Global television network in the cash-and-stock deal. The Shaw family still holds majority control of both companies.

“This combination fits like a glove,” Corus Chief Executive Officer Doug Murphy said on a conference call. He added that the deal would let the company achieve significant operating efficiencies and gain access to new markets to drive growth.

Corus shares were up 2.4 percent at C$11.90 in morning trading, while Shaw jumped 6.6 percent to C$25.12.

The transaction is the latest in a flurry of activity in the typically staid Canadian telecom and media industry.

Last month, Shaw struck a deal to acquire Wind Mobile, the country’s fourth-largest wireless company, for C$1.6 billion. Earlier in 2015, Rogers Communications Inc’s bought smaller rival Mobilicity for C$465 million.

Shaw will get about C$1.85 billion in cash and 71 million of Corus Class B shares.

In a note, Desjardins analyst Maher Yaghi dubbed Shaw’s move to refocus “a better direction for the company and its shareholders in the long term.”

The diversification the deal brings to Corus’ portfolio of channels also strengthens it ahead of regulatory changes that will offer Canadians more freedom to pick and choose channels.

The changes mean that cable and satellite providers will have to offer viewers an affordable basic package of channels and let them to choose others.

Most distributors currently package groups of channels into thematic bundles, which they say means more choice is available at a lower per-channel cost. Consumer advocates complain that viewers are forced to pay for channels they never watch.

Corus’ portfolio after the deal closes will include 45 specialty television channels, 39 radio stations, 15 conventional television stations, and other assets.

The companies expect the deal to close in the third quarter, and Corus said it would immediately add to earnings and free cash flow on a per-share basis.

Additional reporting by Sneha Banerjee in Bengaluru; Editing by Kirti Pandey and Lisa Von Ahn