Six questions for the Shaw family about the Corus-Shaw deal

Lack of transparency, excessive price reinforce need for shareholders to vote NO

TORONTO, March 4, 2016  /CNW/ - The Catalyst Capital Group Inc. ("Catalyst") today posed some important questions in an open letter to the Shaw family, the controlling shareholders of both Shaw Communications Inc. ("Shaw") and Corus Entertainment Inc. ("Corus") (TSX:CJR.B), about how minority shareholders were protected in its deal to sell Shaw Media Inc. ("Shaw Media") from one company to the other – with the economic benefit going to the company in which they have a greater interest.

As the deal is a related party transaction, minority shareholders in both Corus and Shaw are entitled to know the asset was sold via a fair, competitive process -- not a closed one in which Corus was forced to bid against itself. A competitive process protects minority shareholders of both companies, and is a best practice in mergers and acquisitions.

Catalyst asks Shaw:

1. Who ran the sale process?
2. How many confidential information memoranda (CIMs) were distributed?
3. How many non-disclosure agreements (NDAs) were signed back?
4. How many offers were received?
5. What was the price range of final offers?
6. How were the interests of both Corus and Shaw minority shareholders protected?

If there was a competitive process, Catalyst calls for Shaw to release the terms and conditions of all other offers, so that Corus shareholders can see whether it was necessary for Corus to provide the Shaw family with benefits not proportionately available to all other Corus minority shareholders.

"Catalyst concedes it's possible there was a fair and competitive process to sell Shaw Media to Corus, but it seems unlikely given the result – and the fact that the Shaw family has a $1 billion bias, since its $1.2 billion interest in Shaw Communications is ten times larger than its $100 million interest in Corus," said Gabriel de Alba, Managing Director and Partner of Catalyst.

"Since there's a growing concern that the price Corus proposes to pay for Shaw Media is excessive, these are fair questions. Since none of them were answered in the Corus circular, or by Shaw, perhaps the Shaw family can answer them now. The lack of transparency alone is another reason to vote no to the transaction."

The full text of the open letter appears below.

Get informed, and vote NO

Catalyst's analysis, based on Corus' disclosures, reveals that Corus is overpaying for Shaw Media by up to $858 million and paying excessive fees. For the benefit of minority shareholders, Catalyst is calling for a fair allocation of the funding opportunities to all shareholders, not only to the Shaw family. Catalyst is also advocating a reduction of the Shaw Media acquisition price.

In order for Catalyst's proposed rights offering to proceed, minority shareholders must vote no to the proposed acquisition in its current form so that a deal acceptable to Corus minority shareholders can be negotiated ‎and Corus must accept the proposal.

Shareholders are urged to VOTE AGAINST the acquisition resolution. Your vote is important, regardless of how many shares you own.

Catalyst's full analysis and alternatives are available at www.StopCorusShaw.ca.

For questions or assistance, please contact Kingsdale Shareholder Services, at 1-866-851-2484 toll-free in North America, or 1-416-867-2272 outside of North America (collect calls accepted), or by e-mail at [email protected].

About The Catalyst Capital Group Inc. (www.catcapital.com)

The Catalyst Capital Group Inc., a private equity investment firm founded in June 2002, is a leader in distressed-for-control investing. The firm's mandate is to manufacture risk adjusted returns, in keeping with its philosophy of "we buy what we can build." Catalyst's Guiding Principles of investment excellence through superior analytics, attention to detail, intellectual curiosity, team and reputation are key to the firm's success. The Catalyst team collectively possesses more than 110 years of experience in restructuring, credit markets and merchant and investment banking in both Canada and the United States.

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TEXT OF LETTER FOLLOWS:

Dear Shaw Family:

As you know, Catalyst has been critical of your deal to sell a major asset (Shaw Media) from one company you control (Shaw Communications) to another one (Corus Entertainment) -- for a price widely considered as excessive. If approved, this would benefit the company in which your interests are $1 billion greater, but hurt minority shareholders in Corus.

You know Catalyst has been critical of the process, which has featured misleading and confusing disclosures, and a general lack of transparency.

Finally, you know we recommended an alternative that would put more money in the pockets of minority Corus shareholders – which you rejected without any serious consideration.

All these reasons – the excessive price, the disclosure problems, the unwillingness to consider better alternatives – mean that as a significant minority shareholder in Corus, we must vote NO to your deal.

But if you really did protect the minority shareholders of both Shaw and Corus, you still have a chance to prove it.

As the deal is a related party transaction, minority shareholders in both Corus and Shaw are entitled to know the asset was sold via a fair, competitive process -- not a closed process in which Corus was forced to bid against itself. A competitive process is a best practice in the M&A world. It protects minority shareholders of both companies.

So, we have six questions for you:

1. Who ran the sale process?
2. How many confidential information memoranda (CIMs) were distributed?
3. How many non-disclosure agreements (NDAs) were signed back?
4. How many offers were received?
5. What was the price range of final offers?
6. How were the interests of both Corus and Shaw minority shareholders protected?

If there was a competitive process, we ask you to release the terms and conditions of all other offers, so that Corus shareholders can see whether it was really necessary for Corus to provide the Shaw family with benefits not proportionately available to all other Corus minority shareholders.

Without a competitive process, the economic drivers appear to be aligned not in favour of, but against, the minority shareholders. RBC benefited from a higher price transaction, with higher financing and success fees. Barclays failed to point out the lack of a competitive arms-length process and instead accepted the projections without independent verification of completeness, accuracy or fair presentation of the information. In short, all projections were prepared by entities engaged by your family -- with the projections' veracity untested by arm's-length potential buyers – and were likely unreasonable given the subsequent downgrades of Corus by equity analysts. Shouldn't Corus's advisors be focused on how to pay the lowest possible price on the acquisition as they have a fiduciary duty to the minority shareholders?

We concede it's possible there was a fair and competitive process, but it seems unlikely given the result – and the fact that, with respect, your family has a $1 billion bias because your $1.2 billion interest in Shaw Communications is more than ten times larger than your $100 million interest in Corus.

Since there's a growing concern that the price Corus proposes to pay for Shaw Media is excessive, these are fair questions.

Since none of them were answered in the Corus circular, or by Shaw, perhaps you can answer them now. We look forward to your answers.

The Catalyst Capital Group

SOURCE Catalyst Capital Group Inc.

MEDIA ENQUIRIES: Daniel Tisch, Argyle Public Relationships, Direct: [phone], ext. 223, [email protected]; INVESTOR ENQUIRIES: Ian Robertson, Kingsdale Shareholder Services, Direct: 416.867.2333, Cell: 647.621.2646, [email protected]