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Jun 12, 2024

Corus shares may be worthless after Rogers television raid, TD says

Off to the races on an audience perspective, the challenge is demand: Corus CEO

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Shares of Canadian media company Corus Entertainment Inc. may be worth zero if Rogers Communications Inc. is successful in snatching away programming and trademark deals for channels owned by Warner Bros Discovery Inc., according to analysts at TD Cowen.

Corus, an independent television and radio company that’s controlled by the Shaw family of Alberta, is at risk of losing the Canadian rights to programming on five key channels, including HGTV and the Food Network. Rogers said Monday it signed an agreement with Warner to become the rights holder to those TV brands, starting in January. 

If Rogers succeeds in taking over the specialty cable channels “with no compensation for Corus, then our forecasts will be seriously impacted and the equity value of CJR.B shares will likely be zero,” TD analyst Vince Valentini wrote in a report to clients. 

The channels are vital to Corus’ business, yielding about $155 million (US$113 million) in revenue per year and $50 million in earnings before interest, taxes, depreciation and amortization. 

“Corus also has branding and content deals with other key U.S. channels and studios, such as Disney, the History Channel, and Hallmark,” he said. “This could be a very dangerous slippery slope, in our view.”

The Shaw family controls Corus through ownership of the company’s voting shares — but their wealth is actually more closely tied to Rogers after they sold their cable and internet distributor, Shaw Communications Inc., to Rogers last year in a $20 billion transaction. Bradley Shaw, in fact, is on the Rogers Communications board. 

It’s possible that regulators will help Corus, Valentini said in his report. It’s unlikely that the Canadian Radio-television and Telecommunications Commission will “sit back” and allow Rogers to launch 10 or more specialty channels that are in the same genre as licenses already held by Corus and Bell Media, he wrote. 

Corus shares have tumbled into penny-stock territory on growing concerns about a tough advertising market and the company’s debt load. They’ve lost half of their value this week, making Corus’ stock market capitalization around $50 million. As recently as 2022, it was more than $1 billion. 

Corus shares were down 14 per cent to 24.5 Canadian cents as of 3:07 p.m. in Toronto.

A Corus spokesperson declined to comment beyond the company’s Friday press release that announced the loss of Warner programming. In that statement, Chief Executive Officer Doug Murphy blamed “inequitable structural relationships in the Canadian media and telecom industries” that harm independent broadcasters.

Colette Watson, the head of Rogers’ media and sports division, said this week that new programming deals with Warner and NBCUniversal position the Toronto-based company as “a strong Canadian broadcaster that can compete with foreign streamers.”

BNN Bloomberg is owned by Bell Media, which is a division of BCE.

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