Thursday, May 3, 2018

Canadian Radio: Stringray To Acquire Newcap Stations

Stingray Digital Group Inc. is set to acquire Newfoundland Capital Corporation in a cash-and-stock deal valued at $508-million.

Newfoundland Capital, which owns and operates broadcaster Newcap Radio, says it has signed a definitive agreement with Stingray, which would acquire all of its issued and outstanding shares.

The Montreal-based music and digital experience provider will pay $14.75 per share, payable in a combination of cash and Stingray shares.

Newfoundland Capital says the transaction is valued at approximately $508 million, including the assumption of net debt of roughly $112 million as of Dec. 31.

The transaction will be subject to approval of shareholders, customary closing conditions and regulatory approvals.

Stingray’s chief executive and president Eric Boyko says the transaction positions the company as a “major player in the Canadian media landscape.”

Stingray, best known in Canada for its commercial-free streaming service Stingray Music, will pay $506-million for NCC including the assumption of $112-million of debt.

The Globe and Mail reports it is a rare radio takeover in Canada’s media industry, which has consolidated around its largest players over the past decade. Most of the country’s radio companies have become embedded into larger conglomerates like Rogers and Bell and radio has sometimes become an afterthought.

Stingray founder and chief executive Eric Boyko has positioned the company as an active industry consolidator since it went public in 2015, making six acquisitions in the past year alone. This expansion into radio would make it one of the country’s biggest multi-platform music providers, if not the biggest.

In NCC, Stingray gets a business with a strong financial profile and decent scale. NCC, which is based in Dartmouth, N.S., holds 101 radio licences stretching across Canada, including 82 FM and 19 AM stations, and operates 72 local and 29 repeating stations. It has generated a 37-per-cent margin on earnings before interest, taxes, depreciation and amortization over the past two years.

The business also throws off a lot of cash, generating roughly $170-million in advertising revenue annually. Stingray said NCC’s “robust free cash flow generation” will support its growth ambitions and dividend, adding at least 30 per cent to adjusted net income a share within the first year of the deal’s close.

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