The Canadian, and particularly, the Quebec media landscape will change dramatically with the announced acquisition today of Canada’s largest independent media company Astral to BCE Inc. through the purchase of all of Astral’s issued and outstanding shares.
Upon closing of this transaction, Bell will acquire all of Astral’s pay and specialty television services, radio stations, digital media properties and out-of-home advertising activities. The transaction is valued at approximately $3.38 billion, including net debt of $380 million, and will be funded with a combination of cash (approximately 75% of the equity purchase price) and BCE common equity (approximately 25% or $750 million) – with Bell retaining the right to replace shares with cash, in whole or in part, at closing.
With this purchase, Bell, already a telecommunications behemoth in Canada (one of the big three along with Rogers and TELUS), will realize a huge push into Quebec where the largest media player, especially in TV distribution, is Quebecor with its Videotron TV and Internet distribution and its growing mobile telephone service. Astral, which had revenue in 2011 of $1,015 million (a jump from 2010 of 5.7%) had 26% TV market share, compared to Quebecor’s 35%, Bell’s 6% , CBC’s 19% and others 14%.
However, Bell, with all its TV/mobile/Internet and other properties had no products in the out-of-home sector, so it will be interesting to see what it does with its newly acquired 9,500 OOH advertising faces, including 39 spectacular billboards and one lonely piece of digital street furniture). Considering the huge growth in DOOH and the conversion by many other companies of their OOH properties to DOOH, Astral seemed to be notoriously slow in accelerating its DOOH growth. And there was no discussion of Astral’s OOH sector in today’s early morning investor press conference.
Presumably, Astral’s OOH properties would be integrated with its other properties in terms of advertising sales, if Bell plans to hold on to that sector of the business.
With this the case, we have many questions regarding the OOH/DOOH part of the acquisition, but could find nobody ready to answer at either Bell nor Astral. Among the things we wonder:
- Since this is the first big foray by Bell into the out-of-home sector, does it plan to keep it or possibly sell it off? (There was little or no mention of this sector of the business at the investor conference this a.m..)
- Is the out-of-home sector something that Bell was really interested in getting into or is it something that just came along with the TV/radio/broadband sector?
- As mentioned above, Astral has been notoriously slow in developing the digital out-of-home business despite the fact that digital OOH has been taking over the OOH business and growing rapidly worldwide. (Its billboards are spectacular but that’s all it has in digital other than one piece of street furniture outside the Museum of Fine Arts in Montreal). If Bell plans to keep this sector, does it have any plans to develop new DOOH properties and/or convert the many OOH advertising faces already offered by Astral into digital?
- Who will sell the advertising for the DOOH and OOH properties: Astral’s former sales staff or Bell sales (as a convergent property integrated with other Bell & Astral media properties?)?
In the overall buy, Bell will acquire all Class A Non-Voting Shares of Astral for $50 per share, representing a premium of 39% based on Astral’s volume-weighted average closing share price on the TSX for the last five trading days, for a total consideration of approximately $2.8 billion. Bell will also acquire all Class B Subordinate Voting Shares for $54.83 per share, for a total consideration of approximately $151 million, and all Special Shares for a total consideration of $50 million.
“This is an exciting moment in the history of Astral,” says Ian Greenberg, president and CEO. “We believe that the transaction with Bell is an excellent opportunity for Astral, its shareholders and employees. After 15 years as commercial partners, we know each other well and share many important values. The fit between our two companies is a natural and I look forward to seeing our brands become even stronger as part of the Bell family.”
“Bell welcomes Astral and its strong team of media professionals, who have built an outstanding national media business, especially in the competitive Québec marketplace,” says George Cope, president and CEO of Bell Canada and BCE Inc.. “Ian Greenberg is a renowned champion of Canadian broadcasting and we look forward to welcoming him to our Board of Directors when the transaction closes.
“This transaction further accelerates Bell’s strategy to deliver leading content like Astral’s across our world-leading networks to all the broadband screens – TV, smartphone, tablet or computer – that our customers may choose.”
There are major financial settlements involved should the deal not close as expected. Stikeman Elliott LLP is acting as legal advisor to Astral and Goodmans LLP is acting as independent legal advisor to the Special Committee. RBC Capital Markets is acting as exclusive financial advisor to Astral and National Bank Financial is acting as independent financial advisor to the Special Committee.
Astral Media Inc. (TSX: ACM.A/ACM.B) was founded in 1961. It has approximately 2,800 employees, about half in Quebec and the rest mainly in Ontario and British Columbia.
BCE Inc. (TSX, NYSE: BCE) is Canada’s largest communications company, with the Bell and Bell Aliant brands providing a comprehensive and innovative suite of broadband wireless and wireline communication services to residential and business customers across Canada. Bell Media is Canada’s premier multimedia company with leading assets in television, radio and digital media, including CTV, Canada’s #1 television network, and the country’s most-watched specialty channels.