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FYI

Stingray To Acquire Newcap Radio Ownership

The surprise move includes all of Newcap’s 101 broadcast licenses that include 72 radio stations and 29 repeating signals.

Stingray To Acquire Newcap Radio Ownership

By FYI Staff

Stingray Digital Group Inc is set to acquire Newcap Radio owner Newfoundland Capital Corp. in a $500-million deal that is expected to close by year-end, pending CRTC approval.


The surprise move includes all of Newcap’s 101 broadcast licenses that include 72 radio stations and 29 repeating signals. Among the brands are boom 97.3 Toronto, 93.5FM The Move Toronto, K97 Edmonton, XL103.1FM Calgary, VOCM St. John’s, Hits99.1FM St. John’s, Z95.3FM Vancouver, Rock88.9FM St. John, CFCW Edmonton, and Live88.5 Ottawa.

A major addition to Stingray’s current offering, which includes specialty television channels and multiplatform music and video services, this transaction is expected to significantly strengthen its position as the leading independent music business in the Canadian media landscape while continuing to build its global reach and support its growth strategy through a complementary vertical and new revenue sources, the company says.

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Stingray will acquire all of the Class A Subordinate Voting Shares and Class B Common Shares of NCC for $14.75 per share, representing a premium of approximately 16% based on NCC’s volume-weighted average closing share price on the TSX for the last 20 trading days (the “Transaction”). The Transaction is valued at approximately $506 million (the “Purchase Price”), including the assumption of net debt of approximately $112 million as at December 31, 2017. Management expects the combination to be more than 30% accretive to Stingray’s Adjusted net income per share within the first full fiscal year of operations after closing.

“This transaction with NCC comes after months of careful review,” said Eric Boyko, President, Co-founder, and CEO of Stingray. “It represents a considerable milestone for Stingray — positioning us as Canada’s largest public independent media company — and a valuable opportunity for our stakeholders. We have found in NCC an established and trusted partner with a proven track record of delivering results in niche markets across the country. I am excited to expand Stingray’s operations into radio broadcasting and bring on board some of Canada’s most popular on-air talent and an experienced sales force, which will help us grow our revenue streams. I look forward to welcoming the NCC team to the Stingray family and collaborating with the current management in place.”

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Rob Steele, Chairman, President and CEO, of NCC said in the same release: “Today marks the start of an exciting chapter for NCC. By joining forces with Stingray, we are of the view that the synergies will allow our business to move towards even greater success. Together, we have begun to build a solid foundation for Canada’s next great media group.  We expect that our combined company will stand out in today’s fiercely competitive market for its world-class talent and complementary service offering. On behalf of NCC’s management and Board of Directors, I am thrilled NCC is joining the Stingray family.”

Montreal-based Stingray is a world-leading provider of multi-platform music and video services with clients in 150 countries.

Stingray provides music and digital services to a wide variety of clients including background music for businesses and online music channels. This is the company’s first foray into radio.

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In a release issued by Stingray, the rationale for the acquisition follows:

Unique opportunity to create Canada’s largest public independent media company

  • Confirms Stingray’s leading position as a multiplatform music products and services provider by adding 72 local radio stations and 29 repeating stations also available nationally through the web and mobile apps

  • Well-positioned to continue to pursue strategic acquisitions across all platforms and geographies, including fragmented Canadian regional radio market

  • Strengthens Stingray's position as the leading independent music business in the Canadian media landscape

  • Increases Stingray’s reach by millions of weekly listeners across Canada

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  • Provides a national promotion platform to accelerate Stingray’s mobile subscriber growth, a new channel to promote Stingray’s SVOD products and specialty TV channels

Diversifies Stingray’s revenue profile with complementary advertising revenues

  • Provides Stingray with a balanced mix of revenues from telcos, cablecos, commercial music (retailers) and national and local advertising

  • Leverages NCC’s advertising client base and sales force to grow Stingray's TV specialty channels advertising revenues

  • $5 million of expected incremental advertising revenues within 18 to 24 months post-closing

Acquisition of a leading radio operator with a strong financial profile

  • #2 private radio player in Canada by number of radio stations and #3 by revenue

  • Coast to coast geographical reach with a presence in seven (7) provinces

  • CRTC regulated business providing stable returns with best-in-class operating metrics

  • Experienced management and sales team

Expected cost synergies and cross-selling opportunities

  • $8 million expected head office cost reductions and public company cost savings within the first year

  • Provides Stingray instant access to an experienced advertising sales team and existing national and local client base

  • Opportunity to cross-sell Stingray’s products across established retail client base, including: restaurant chains, grocery stores, consumer staples, car dealerships, telcos and financial institutions

Bolsters Stingray’s financial profile to accelerate its acquisition strategy

  • Expected to significantly increase Stingray’s Adjusted EBITDA and Adjusted free cash flow

  • Expected significant first year accretion to Adjusted net income per share of more than 30%

  • Robust free cash flow generation expected to support Stingray’s growth and dividend policy

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