FORM 51-102F3
MATERIAL CHANGE REPORT
Item 1: Name and Address of Reporting Issuer
Shaw Communications Inc. (“Shaw”)
630 — 3rd Avenue S.W., Suite 900
Calgary AB T2P 4L4
Item 2: Date of Material Change
January 13, 2016
Item 3: News Release
A news release was issued by Shaw and disseminated through Marketwire on January 13, 2016.
Item 4: Summary of Material Change
On January 13, 2016, Shaw agreed to sell 100% of its wholly-owned broadcasting subsidiary, Shaw
Media Inc. (“Shaw Media”), to Corus Entertainment Inc. (“Corus”) for $2.65 billion (the
"Transaction”), to be paid through a combination of cash and Class B non-voting participating
shares of Corus (“Corus Class B Shares”).
Item 5: Full Description of Material Change
On January 13, 2016, Shaw entered into a definitive share purchase agreement (the “Share Purchase
Agreement”) with Corus to sell 100% of its wholly-owned broadcasting subsidiary, Shaw Media, for
$2.65 billion, subject to certain post-closing adjustments. The consideration will be comprised
of approximately $1.85 billion in cash and $800 million in Corus Class B Shares, being
71,364,853 Corus Class B Shares.
Shaw Media is comprised of Global Television, 19 specialty channels and a number of digital
properties.
The previously announced acquisition of WIND Mobile Corp. (“WIND”) and sale of Shaw Media
position Shaw as a leading pure-play connectivity company. Shaw will be focused on delivering
consumer and small business broadband communications supported by its best-in-class wireline, WiFi
and wireless infrastructure. WIND will join Business Network Services and Business Infrastructure
Services as a third growth business for Shaw.
The combination of Shaw Media and Corus creates a powerful integrated media and content company
with increased scale, a strong mix of media properties, meaningful synergies and best-in-class
management that is well positioned to succeed in the new regulatory environment. Shaw’s equity
interest in Corus will allow Shaw shareholders to participate in the upside potential resulting
from the combination of Shaw Media and Corus.
Transaction Details
The Transaction purchase price of $2.65 billion represents approximately 8.6x proportionate 2015
EBITDA or 7.7x consolidated 2015 reported EBITDA.1 Upon closing of the Transaction,
Shaw will receive approximately $1.85 billion in cash and 71,364,853 Corus Class B Shares valued at
$11.21 per share.
The Share Purchase Agreement contains customary representations, warranties and covenants of each
of Shaw and Corus, including, among others, covenants to cooperate with respect to financing
arrangements, the implementation of a pre-closing reorganization of Shaw Media as may be reasonably
requested by Corus or the implementation of a requisite alternative structure to the purchase and
sale of Shaw Media as may be requested by Shaw, subject to certain conditions. The Share Purchase
Agreement provides for indemnification by each of Shaw and Corus in favour of the other party with
respect to breaches or non-fulfilment of certain representations, warranties, covenants or
agreements, subject to the exceptions, conditions and limitations contained in the Share Purchase
Agreement. Shaw has also agreed to indemnify Corus in connection with certain tax related
liabilities.
The Transaction is conditional upon the satisfaction of certain conditions, including Corus
shareholder approval as described below under “Acquisition Approvals”, approval by the Canadian
Radio-television and Telecommunications Commission, Toronto Stock Exchange (“TSX”) approval of the
listing of the Corus Class B Shares to be issued to Shaw, and certain other closing conditions
customary in a transaction of this nature. The Transaction is not subject to approval by the
shareholders of Shaw or any financing condition and is expected to close in the third quarter of
fiscal 2016.
Immediately following the closing of the Transaction, Shaw is expected to own approximately 39% of
Corus’ total issued equity, including Class A participating shares (“Corus Class A Shares”) and
Corus Class B Shares. Shaw will retain its existing interest in shomi, the subscription based,
streaming video on-demand service launched in 2015 in partnership with Rogers Communications.
Acquisition Approvals
The Transaction constitutes a “related party transaction” within the meaning of Multilateral
Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”)
due to the relationship between Shaw and Corus. JR Shaw, directly and indirectly through the Shaw
Family Living Trust, is a control person of Corus and is therefore a “related party” of Corus. As
JR Shaw, directly and indirectly through Shaw Family Living Trust, is also a control person of
Shaw, Shaw is an affiliated entity of JR Shaw, and is therefore also a “related party” of Corus.
MI 61-101 provides that a related party transaction is subject to “minority approval” (as defined
in MI 61-101), and that the issuer obtain a formal valuation in respect of the transaction, unless
an exemption is available. Accordingly, in order for the Transaction to proceed, the Transaction
must be approved at a special meeting of holders of Corus Class A Shares and Corus Class B Shares
(the “Corus Meeting”) by at least a majority of the votes cast by or on behalf of the holders of
Corus Class A Shares and Corus Class B Shares at the Corus Meeting, in each case voting separately
as a class, excluding for these purposes, the votes cast by certain “related parties” to Corus in
accordance with the “minority approval” requirements of Part 8 of MI 61-101. For this purpose, the
Corus Class A Shares and Corus Class B Shares held by the Shaw Family Living Trust and its
affiliates will be excluded. In addition, Corus will be required to obtain shareholder approval in
respect of the Transaction in accordance with the requirements of the TSX.
In respect of Shaw, the Transaction is exempt from the formal valuation and minority shareholder
approval requirements of MI 61-101, as neither the fair market value of Shaw Media nor the fair
market value of the consideration for the Transaction exceeds 25% of Shaw’s market capitalization,
as determined in accordance with MI 61-101.
Neither Shaw nor any director or senior officer of Shaw, after reasonable inquiry, is aware of any
“prior valuation” (as defined in MI 61-101) in respect of Shaw that relates to the subject matter
of or is otherwise relevant to the Transaction having been prepared in the past 24 months.
Fairness Opinions and Board Approval
Shaw appointed a special committee of independent directors of the Board of Directors of Shaw (the
“Committee”) to oversee the review and negotiation of the Transaction, given the related party
nature of the Transaction.
The Committee was constituted on October 21, 2015, comprised of Adrian Burns, Michael O’Brien and
Paul Pew, with Mr. Pew acting as Chair. Each member of the Committee assessed and confirmed his or
her independence from the Shaw family and from the management of Shaw, Shaw Media and Corus. The
Committee retained Blair Franklin Capital Partners (“Blair Franklin”) as its independent financial
advisor and Goodmans LLP (“Goodmans”) as its independent legal advisor.
From October 21, 2015 to January 12, 2016, the Committee met formally ten times, with most of those
meetings being in person. With the exception of the initial meeting, Blair Franklin and Goodmans
participated in each of these meetings. Management of Shaw, TD Securities Inc. (“TD Securities”),
financial advisors to Shaw, and Davies Ward Phillips & Vineberg LLP, legal advisors to Shaw,
participated in a portion of most of the meetings. Each meeting also included at least one in
camera session. In addition to these formal meetings, the members of the Committee had numerous
informal conferences among themselves and with management and the advisors.
TD Securities and Blair Franklin have each provided an opinion to the Committee and Board of
Directors of Shaw that, subject to the assumptions, qualifications and limitations provided
therein, the consideration to be received by Shaw pursuant to the Transaction is fair, from a
financial point of view, to Shaw.
The Committee unanimously determined that the sale of Shaw Media to Corus on the terms reflected in
the Transaction agreements submitted to the Board is reasonable and fair to Shaw and is in the best
interests of Shaw, taking into account the interests of all stakeholders, and recommended that the
Board of Directors of Shaw approve the proposed Transaction and the entering into of the
Transaction agreements. The Board of Directors of Shaw approved the Transaction based on, among
other things, the recommendation of the Committee, and the fairness opinions of TD Securities and
Blair Franklin.
Governance and Investor Rights Agreement
The Share Purchase Agreement provides that, on closing of the Transaction, Shaw and Corus will
enter into a Governance and Investor Rights Agreement. Pursuant to this agreement, Shaw has agreed
to retain approximately one third of its interest in Corus for 12 months post-closing, a second one
third for 18 months post-closing and the final one third for 24 months post-closing. Shaw has
agreed to have its Corus Class B Shares participate in Corus’ dividend reinvestment plan while
subject to these retention periods until August 31, 2017.
The Governance and Investor Rights Agreement will provide Shaw with specified rights to nominate up
to three members of the Board of Directors of Corus, subject to certain continued minimum ownership
thresholds; pre-emptive rights that allow it to maintain its pro rata ownership level of the Corus
Class B Shares in various circumstances; and registration rights that require Corus to assist Shaw
in effecting sales of Corus Class B Shares through a prospectus qualification process.
Planned Use of Proceeds
Shaw expects to realize net cash proceeds from the Transaction of approximately $1.8 billion which
will be used to fund the previously announced acquisition of WIND for $1.6 billion.
Subject to the receipt of all necessary approvals, Shaw expects the Transaction and the acquisition
of WIND to close in the third quarter of fiscal 2016. If the acquisition of WIND closes in advance
of the Transaction, Shaw plans to draw on the previously announced bridge facility to close the
acquisition of WIND, pending the closing of the Transaction. Shaw’s pro forma net debt to EBITDA
leverage metric, assuming successful completion of both transactions, remains within Shaw’s target
range of 2.0x – 2.5x.
Caution Regarding Forward-Looking Statements
Statements in this news release relating to the Transaction, the acquisition of WIND, Shaw’s
related financing, Corus’ competitive position and growth prospects with its acquisition of Shaw
Media and Shaw’s enhanced growth profile, long term free cash flow position and commitment to
growing dividends constitute “forward-looking statements” within the meaning of applicable
securities laws. These statements are based on assumptions made by Shaw that it believes are
appropriate in the circumstances, including without limit, that: regulatory and Corus shareholder
approvals will be received and other conditions to closing the Transaction will be satisfied;
regulatory and other conditions to closing the acquisition of WIND will be satisfied; Corus will
realize significant growth prospects and opportunities for synergies and strengthen its competitive
position with its acquisition of Shaw Media; expected business and financial results for Shaw and
WIND will be realized; the pricing environment for WIND is stable relative to current rates; there
is no significant market disruption or other significant changes in economic conditions,
competition or regulation affecting Shaw or WIND; the planned upgrade of the WIND network to 4G
LTE, other growth plans and the converged network of Shaw’s network and WIND’s network can be
executed in a timely and cost effective manner to yield the results expected for Shaw and WIND; and
the anticipated free cash levels are sufficient to support future dividend increases. There is the
risk that one or more of these assumptions will not prove to be accurate and this may affect
closing of the transactions and/or the business, operational and financial expectations for Corus,
Shaw Media or Shaw. Undue reliance should not be placed on any forward-looking statement. Except
as required by law, Shaw disclaims any obligation to update any forward-looking statement.
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Item 6: Reliance on Subsection 7.1(2) of National Instrument 51-102 |
Not applicable
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Item 7: Omitted Information |
None
Item 8: Executive Officer
The following executive officer of Shaw is knowledgeable about the material change and this report:
Vito Culmone
Executive Vice President & Chief Financial Officer
403-750-4500
January 19, 2016
1 “EBITDA” does not have a standard
definition prescribed by IFRS and therefore may not be comparable to similar
measures disclosed by other companies. EBITDA is equivalent to “Operating
income before restructuring costs and amortization” which is often used in the
Company’s disclosure and is defined as revenue less operating, general and
administrative expenses. For discussion on this measure, see 2015 Annual
Report under “Key Performance Drivers”. “Proportionate EBITDA” means EBITDA
less the non-controlling interests in properties of Shaw Media held by third
parties. Proportionate EBITDA reflects the results of Shaw Media relative to
its own interest in its operations and excludes such interests of third
parties.
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