Children’s entertainment giant DHX considers sale after stock routed

• DHX Media Ltd., the producer of popular children’s television shows like Teletubbies and Caillou, is considering a sale after poor quarterly results contributed to a 30- per- cent drop in the share price in less than two weeks.

The Halifax- based com- pany’s board has initiated a strategic review focused on maximizing shareholder value, DHX said Monday in a statement. Possible outcomes could include the sale of some or all of the company, or a merger with another party.

DHX rallied after t he stock resumed trading following a halt, gaining 5.5 per cent to $ 5.52 in Toronto af- ter earlier falling as much as 4.2 per cent. The shares are down 22 per cent on the year.

The company could fetch a mid- point valuation of $ 8.55 a share in a takeover, Canaccord Genuity analyst Aravinda Galappatthige said in a note.

“Given the size of DHX’s library, its production and distribution expertise and infrastructure plus a current positive operating environment, we believe there would be genuine demand,” he wrote. “DHX Media can realize a substantial premium to current prices.”

If DHX chooses to divest some assets, it could sell the Family Channel and a minority stake in online streaming service WildBrain for as much as $ 100 million, Galappatthige said.

Last week, DHX reported earnings per share and revenue that missed the lowest analyst estimate, sending the share price tumbling 16 per cent in one day. Chief executive officer Dana Sean Landry said the results were “not acceptable,” blaming Teletubbies’ weakness in the U. S. market and the recent acquisition of the Peanuts and Strawberry Shortcake brands, which caused management to take its “eye off the ball.”