TORONTO – In a note to clients, BMO Nesbitt Burns media and cable analyst Tim Casey notes the Shaw Communications purchase price of Mountain Cablevision may be as high as $300 million (a whopping $7,300 per sub).
While saying the impact of the purchase is “slightly negative” for Shaw, Casey notes that industry contacts “have speculated a price in the $300mm range, implying roughly 12x EBITDA,” he wrote.
“The transaction is a surprise given Shaw’s Ontario assets are in Sault Ste. Marie, Kenora and Thunder Bay. We expect operating synergies will be limited.
“Given Shaw’s industry-leading track record regarding capital allocation, we are inclined to believe this is a tactical acquisition for a potential asset swap.”
Bragg Communications owns systems in Grande Prairie, Alberta (25,000 subs) and Delta, B.C. (39,000) which “would appear to be a more logical fit with Shaw,” notes Casey.
Mountain Cable’s territory, on the other hand, could interconnect easily with EastLink’s Amtelecom system in Southwestern Ontario.
Despite the fact that Shaw, Cogeco, Rogers and EastLink are all believed to have bid for Mountain in a process that took months, “(w)e do NOT believe this is the beginning of an acquisition/consolidation cycle for Shaw or the other domestic industry players,” Casey added (his caps).
– Greg O’Brien
