POLITICS

DHX Media buys pay TV Family Channel giving it a platform for more content

11/28/2013 10:02 EST | Updated 01/28/2014 05:59 EST
The Halifax company that creates and sells children's programs such as "Caillou" and "Teletubbies" is buying the popular Family Channel from Bell Media, giving it a platform to create more shows to sell globally.

DHX Media (TSX:DHX) will also use Family, a pay TV channel, to increase Canadian-created animated shows for children, CEO Michael Donovan said Thursday in an interview.

"This is another brick in the foundation of being able to create shows critically that we can sell to the world," Donovan said, adding that agreement is the company's first acquisition of TV channels.

The $170-million cash deal for the Family Channel with Bell Media (TSX:BCE) also includes the Disney Junior channels in English and French and Disney XD.

Bell agreed to sell Family and the other three channels as part of the approval process for its recent acquisition of Montreal's Astral Media, the original owner of the Family and Disney channels.

Donovan said the need for content is growing as television is watched on TVs, computers, tablets and smartphones.

"It's consumed through multiple formats and platforms that's leading to an improved experience for consumers," he said. "The whole thing is growing — the whole pie."

The Family Channel airs shows such as "Jessie," "Gravity Falls," and "Wizards of Waverly Place" and gets about 60 per cent of its programming from Disney. The channel has about 5.7 million subscribers in Canada and a 29.6 per cent share of the English-language market for viewers aged two to 17 years.

Donovan also said DHX is a leading player in providing content for digital platforms.

"We are one of the leaders in the world in selling to broadcasters, to Netflix, to iTunes to Yahoo and in almost every country in the world in almost every media," he said.

RBC Capital Markets analyst Haran Posner called the deal "transformational" for DHX media, adding that it's "a very attractive price for high-quality assets."

The acquisition provides the company with a distribution channel to promote its own family and kids brands and a stable stream of mostly subscription-based revenue, Posner said in a research note.

DHX has been expanding sales of children's programs on digital platforms such as online service Netflix and mobile devices since buying Toronto's Cookie Jar Entertainment in 2012. Cookie Jar, at the time, had digital distribution agreements in place with providers including DISH Network, Amazon.com and U.S. cable provider Comcast.

The company also owns and markets well-known children's programs such as "Inspector Gadget," "Johnny Test," and "Yo Gabba Gabba!"

The deal between Bell and DHX is subject to approvals but is expected to close in 2014.

On the Toronto Stock Exchange, DHX shares closed up $1.02, or 24.46 per cent, at $5.19 on Thursday. BCE stock was up 15 cents at $46.82.