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Should Quebecor close the capital of TVA?



In light of the performance and recovery measures presented two weeks ago by the TVA Group, an institutional investor believes that Quebecor would do a good deal by closing the capital of the Montreal broadcaster.

Quebecor, which controls 65% of TVA Group shares, announced in February the elimination of 240 jobs, more than half of them at TVA, to help restore its finances.

“It is now even more logical to close the capital of TVA instead of throwing people out,” says portfolio manager Stephen Takacsy of the firm Gestion Lester.

“Since TVA wants to cut expenses and has announced job cuts, the company would do well to save millions in public company administration, compliance and governance costs to manage potential conflicts of interest between TVA, Videotron, Quebecor, etc., by closing the capital and thus buying out the minority shareholders while the share price is low,” he explains.

“And after that, Quebecor will have 100% access to cash flow of VAT. »

There are 13.7 million TVA Group Class B shares outstanding. By offering $4 per share, that is to say a premium of more than 100% compared to the current stock market price, Stephen Takacsy calculates that it would cost “only” $55 million for Quebecor to close the capital of VAT.

” They are peanuts for a company in Quebecor’s financial position,” he said.

TVA’s stock is currently worth $1.70 on the Toronto Stock Exchange, but was worth over $20 in the early 2000s. still just over $10. The stock has since fallen considerably.

Stephen Takacsy estimates that a withdrawal of the subsidiary of Quebecor Media from the Stock Exchange would allow annual savings of 2 to 3 million solely related to the administrative costs of a public company.

Called to react to the comments of this asset manager, the management of Quebecor opts for caution. “According to securities rules, if a decision on the matter were made, everyone should be informed at the same time. We will therefore not comment,” the company replies by email.

Freedom Mobile, a “winning” strategy

Gestion Lester is a long-time shareholder of Groupe TVA. This firm is also a shareholder of Quebecor and says it has recently increased its stake in the Quebec conglomerate, whose main subsidiary is Videotron. In addition to shares of Quebecor, Gestion Lester also says it holds corporate bonds of the company.

“Quebecor represents the largest portion of our fixed income strategy,” says Stephen Takacsy. Telecom assets are high quality assets. »

He explains that Gestion Lester recently bought shares of Quebecor because he believes that the company will emerge a winner from the transaction by which Rogers wishes to acquire Shaw and sell Freedom Mobile – Shaw’s wireless subsidiary – to Quebecor to allow it to expand its operations in Ontario and Western Canada.

“It will be positive for Quebecor and the title of the company is really not expensive,” said Stephen Takacsy. The price paid for Freedom [2,8 milliards] is lower than the market expected, implying less leverage than the market expected, and no equity issuance to finance the transaction as the market worried about potential dilution. »

“Quebecor’s prospects are very attractive compared to the current value of the stock,” he adds.

Future of TVA Sports

Regardless of the decision to close TVA’s capital or not, Stephen Takacsy believes that the contract signed in partnership with Rogers to broadcast National Hockey League (NHL) games should not be renewed. “At least not at this price,” he says.

Quebecor announced in 2013 a 12-year agreement valued at $700 million to become the official French-language broadcaster of the NHL in the country.

The decline in profitability of TVA Sports, a channel launched in 2011, is one of the main factors mentioned by management two weeks ago to explain the results of the TVA Group and the implementation of a restructuring plan.

The big boss of Quebecor, Pierre Karl Péladeau, subsequently cast doubt on the future of TVA Sports at the microphone of Paul Arcand, at 98.5 FM. “There are a number of considerations that do not militate against the prospect of success as far as TVA Sports is concerned,” he said.

It would not be the first time that TVA has shut down a relatively young chain in the company’s recent history. In deficit, the economic and financial news channel Canal Argent was closed in 2016 after 11 years on the air.

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