BCE Moves Forward with Astral Deal

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Largely in line with expectations, BCE Inc. announced the sale of Teletoon, Teletoon Retro (English and French), Cartoon Network, Historia and Séries+ to Corus and an ongoing auction for Family (including Disney Junior English), Disney XD, Disney Junior French, Musimax and Musiqueplus.

BCE indicated that these properties along with the eight radio stations being auctioned represent roughly 23% of Astral’s EBITDA. The valuation on the properties sold to Corus was put at 10.4x EBITDA in line with the estimated 10.3x EBITDA valuation assigned to BCE’s offer for Astral.

These moves respect the CRTC’s concerns over BCE’s interests on a national basis and within Quebec. BCE noted that after the divestitures, Bell Media will have a French-language viewing share of 23% and an English-language viewership of 35.7%. The Canadian Competition Bureau released that it would not intervene in the transaction as proposed. We believe the deal as now presented will likely receive CRTC approval.

While BCE has never specifically given 5% annual dividend growth as a guidance, the company has indicated that management equity incentives are linked to growth roughly in line with that level. The recent move to a $2.33/sh (+2.6%) annual dividend leaves BCE in the middle of its 65% – 75% FCF payout ratio. However, excluding the 2013 pension benefit takes the payout to the upper end. We believe BCE is more likely to announce a second dividend increase this year with approval to acquire Astral. Astral could add $0.15 of FCF/sh for its first full year.

 

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