Friday, 19 October 2012

CRTC Strikes Down BCE-Astral Deal


In a move that nobody saw coming, the Canadian Radio-television Telecommunications Commission rejected BCE's bid for Astral media, stating that BCE would be too large and control to much of the market. What does this mean for shareholders of either company (I happen to have shares in both companies)?

Bell is obligated to pay a $150 million break fee if the deal falls through; which will happen unless BCE tries to appeal the decision. This comes out to about $3 per share is Astral.

Astral media will probably take a hit in market price since BCE may not be buying all the shares for $50 a pop anymore. However, it is believed that Astral will continue to look for a suitor because it's speculated that Ian Greenberg, the CEO plans to retire and he has no known successor. Since everybody still thinks that Astral intends to sell, that may keep the market price afloat. The only issue here is that the list of potential buyers is significantly shorter; larger companies like Rogers would run into the same competition issues as BCE did. Cogeco has been the name that I've seen thrown around as a potential suitor. If worse comes to worse and there's no buyers, then it is believed that Astral will just sell off its assets piece by piece.

So what does this mean or me personally? Back when the deal was announced, my profits jumped. I decided to hold on to the shares until the deal was sealed so that I could get the premium. When the deal was showing signs of faltering I decided to keep holding Astral stock because I honestly thought that the worst thing that could have happened was that the CRTC approved the deal but with changes; not outright kill it.

As of writing, Astral just took a 15% nosedive. This triggered my stop limit and I sold out for a mere 3% gain (not including dividends accumulated for holding the stock for well over a year). Astral still has solid fundamentals but with a takeover looking slim, I think the price will sink for the time being. When it gets even more depressed, I would not hesitate to jump back in at a lower price point.

- the Paperboy

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