MONTREAL and DARTMOUTH, N.S. – Stingray Digital Group, until now known mostly as a global, multiplatform provider of music channels to subscription TV companies and their customers, has made a significant move into a more traditional music format: broadcast radio.
The company announced today after the close of trading it has acquired Newfoundland Capital Corporation (NCC, or as it’s more commonly referred in the radio business, Newcap), one of Canada’s largest radio broadcasters with 101 licences (82 FM and 19 AM) across the country in a deal valued at $506 million.
According to Stingray, this move will significantly strengthen its position as the “leading independent music business in the Canadian media landscape while continuing to build its global reach, and support its growth strategy through a complementary vertical and new revenue sources,” reads the release.
As for the nitty-gritty financial details, Stingray will officially “acquire all of the class A subordinate voting shares and class B common shares of Newcap for $14.75 per share, representing a premium of approximately 16% based on NCC’s volume-weighted average closing share price on the TSX for the last 20 trading days. The transaction is valued at approximately $506 million, including the assumption of a net debt of approximately $112 million as at December 31, 2017. Management expects the combination to be more than 30% accretive to Stingray’s adjusted net income per share within the first full fiscal year of operations after closing.”
The purchase also requires CRTC approval, which means a tangible benefits package for the industry. In radio, the Commission generally requires a package equal to 6% of the purchase price to be given to various funding agencies.
Based in Dartmouth, N.S., Newcap Radio reaches millions of listeners each week (historically through its large number of stations and repeaters in smaller markets such as Halifax, St. John’s, Kamloops, Miramichi, Sudbury and Wainwright, although in recent years the company has launched and acquired stations in larger centres, including in Toronto, Vancouver and Ottawa. It owns stations in Calgary and Edmonton, too) through a variety of formats, from hip-hop to country to newstalk. It operates 72 local radio stations and 29 repeating stations — also available on web and mobile — in seven provinces. It also owns a TV station in Lloydminster, Alberta which is a CTV affiliate, and employs approximately 800 people.
This deal “represents a considerable milestone for Stingray — positioning us as Canada’s largest public independent media company — and a valuable opportunity for our stakeholders,” said Eric Boyko (pictured), president and CEO of Stingray, in the announcement. “I am excited to expand Stingray’s operations into radio broadcasting and bring on board some of Canada’s most popular on-air talent and an experienced sales force, which will help us grow our revenue streams.”
“We expect that our combined company will stand out in today’s fiercely competitive market for its world-class talent and complementary service offering,” added Rob Steele, chairman, president and CEO, of NCC. Steele will no longer be NCC CEO after the transaction and become a member of the Stingray board.
Newcap’s COO, Ian Lurie, will remain on at Stingray to run its new radio division.
The deal provides a number of positives for Stingray, including a national promotion platform to boost mobile subscriber growth for its music streaming app, as well as new promotional channels to promote Stingray’s SVOD products and specialty TV services Stingray Hits, Vibe, Loud, Retro, Lite and its three 4K channels.
Owning Newcap also adds significant national and local advertising dollars to Stingray’s revenue mix and the new national sales team can cross-sell the company’s business music products across Newcap’s retail client base, including: restaurant chains, grocery stores, car dealerships, telcos and financial institutions.
The transaction will be effected through a plan of arrangement and will be subject to the approval of 66 2/3% of the votes cast by NCC shareholders, voting together as a single class, at a special meeting of NCC shareholders expected to be held in July 2018, reads the release. That said, the Steele family owns control of the company, so voting is not in doubt.
Members of the Steele Family, representing approximately 87% of the outstanding shares and approximately 93% of the voting rights of NCC, have entered into irrevocable voting support agreements in favour of the transaction, and a 5-year lockup and voting trust agreement in favour of Eric Boyko for the Stingray shares to be received by them as consideration in the Transaction, notes the release.
La Caisse de depot et placement du Quebec is kicking in $40 million to help with the deal. “Through this transaction, La Caisse supports Stingray in its evolution and in the strengthening of its offer to become the independent music business leader in Canada,” said Christian Dubé, EVP, Québec at La Caisse in the press release. “Since our initial investment in Stingray three years ago, the company has experienced exemplary performance. We are convinced that the company is well positioned to continue its growth in international markets.”
