Corus faces bigger cut to dividend after Bell deal is blocked

Corus Entertainment Inc. may have to cut its dividend more than expected after the federal competition watchdog blocked its $200-million sale of two French-language specialty television channels to Bell Media.

The Toronto-based media company announced Monday that the Commissioner of Competition did not approve the sale of Historia and Series+ to BCE Inc., a deal that would have helped Corus with its goal of reducing its debt load.

On Friday, the Competition Bureau told the companies the deal wouldn’t go through because of an agreement Bell made to address competition concerns when it bought Astral Media in 2013. Bell previously owned a stake in the two channels, but was required to divest in order to purchase Astral. At the time, Bell agreed not to buy them again for 10 years — a clause that was the sticking point in this deal, according to a statement from the Competition Bureau.

“The bureau’s review determined that it would not be appropriate for the commissioner to approve the transaction since the competitive circumstances that led to the consent agreement have not materially changed to the point where the remedy is no longer required,” it stated.

Bell and Corus both argued the sale should be permitted due to changes in the television environment, which is grappling with Netflix’s skyrocketing popularity, soft advertising and stagnating viewership on traditional platforms.

For Corus, the sale was also a chance to improve its cash position. Corus hasn’t paid off its debt as fast as anticipated since it bought Shaw Communications Inc.’s media assets — including the two channels it’s trying to off-load — for $2.65 billion in 2016. That transaction was financed with a loan.

Analysts already expected a dividend cut when Corus updates its dividend policy in June given challenges in the traditional media market, but without the cash influx from the sale they predict a deeper slash.

“We believe today’s decision is likely to force the company to be much more pragmatic about its dividend policy and is likely to lead to a bigger cut in the dividend than initially anticipated,” Desjardins analyst Maher Yaghi noted to clients.