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Shareholder advisor raises concern over Corus’ debt, equity in Shaw Media deal, but urges approval anyway

ISS cautions that Corus is taking on "a substantially greater amount of debt than it has maintained in the past" in its acquisition of Shaw Media, pushing its leverage ratio beyond its target range.

An influential shareholder advisory firm has raised a red flag about the way Corus Entertainment Inc. intends to fund its $2.65-billion acquisition of Shaw Media Inc., but continues to be advising shareholders to approve the transaction.

In a Feb. 19 report, U.S.-based Institutional Shareholder Services (ISS) Inc. expressed concerns over just how much debt and equity Corus will raise to finance the acquisition, which is paid through $1.85 billion in cash and $800 million in stock.

ISS cautions that the Toronto media company is dealing with “a substantially greater amount of debt than it has maintained previously,” pushing its leverage ratio beyond its target range. ISS says that by issuing a total of 104 million new class B shares with regards to this transaction, Corus is diluting its estimated outstanding 84 million shares inside a fashion that “appears high.”

Indeed, during a Jan. 13 conference call following the deal was announced, Corus chief executive Douglas Murphy said that the company is now “going to be intensely centered on delevering.” 

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