Strategy

Is Shaw's eye on Corus Entertainment?

Shaw’s purchase of Canwest leaves investors wondering where Corus fits in.

Is Corus Entertainment destined to become the second act in Shaw Communication’s recent content play? That’s what Bay Street wants to know now that a deal with Canwest’s disgruntled broadcasting partner, Goldman Sachs, has allowed Calgary’s Shaw family to separate Winnipeg’s Asper clan from Canwest’s distressed television assets. These include the Global TV network and a stable of highly profitable specialty channels, including HGTV, Food Network and Showcase.

Corus – an integrated media company with specialty TV channels of its own, including the W Network, YTV and Treehouse – was spun out of the Shaw cable business back in 1999, when the Shaws didn’t think so-called convergence strategies made much sense. The $7.9-billion company now operates as a separate public venture, but it is still controlled by the Shaw family. And with the $2-billion Canwest deal, Shaw Communications has just bet big on converging distribution assets with content.

Shaw is out to build a multimedia and wireless empire that rivals Toronto’s Rogers Communications, using TV shows to attract customers to cable services and a wireless offering set to launch next year. On a recent conference call with analysts, company executives made a big deal about requiring full ownership of Canwest’s TV operations to make this strategy work. And the repeated reference to “the need to have 100%” now has industry watchers at Scotia Capital wondering if Shaw has related plans to bring Corus home.

Paul Robertson, a key Corus TV executive just tapped to help manage Shaw’s new broadcasting business, is adding fuel to the speculative fire. He and John Cassaday, founding president and CEO of Corus, have a history of working together (at Corus, CTV and Campbell Soup), and insiders find it odd that they will now work as competitors.

But investors shouldn’t get too excited about a possible move on Corus, because Shaw must first close the Canwest deal before seriously looking at other acquisitions, and there is no obvious need to privatize Corus.

“A new Canwest with a strong balance sheet will require everyone in broadcasting to stay on top of the game,” points out one Bay Street analyst, “but at this point there is nothing earth shattering here,” meaning no material impact on Corus if it remains a separate entity.

Keep in mind, this source adds, Corus is already under Shaw control, and it would take a lot of capital to privatize it.

When asked where Corus fits into the expanded Shaw empire, Corus spokeswoman Sally Tindal redirected the question to Shaw officials. And with some investors already worried about a possible dividend cut, Shaw president Peter Bissonette was quick to pour cold water on speculation about another acquisition. “This is not a creeping takeover,” he said, adding there are no plans for “any integration or economies of scale sort of things. Corus is a totally separate deal, other than, of course, the fact that we selected Paul Robinson to manage Shaw’s new broadcasting assets.”

Bissonette says competition between the two Shaw-controlled content outfits is a non-issue, noting the company’s cable business competes with its satellite offering.

Simply put, he says, Shaw wants quality content from all Canadian broadcasters to be available on its multiple platforms. But that was a problem in the past, because Corus was the only player really co-operating. And that’s why Shaw was attracted to the Canwest assets.