SCR.to 1.69 +.19 in play? "The Score" Sports Station in Canada.
Now in play, Score keeps head up and stick on ice
GRANT ROBERTSON
From Saturday's Globe and Mail
When Score Media Inc. sent out copies of its annual report last week, the specialty broadcaster broke from the humourless, no-frills approach to financial statements typical of the post-Enron, post-tech-bubble corporate world.
In a box the size of a small briefcase, shareholders found a variety of sports-fan accoutrements: a cigar, inflatable thunder sticks, beef jerky and face paint in blue and gold -- the colours of its cable sports network, The Score.
Chief executive officer John Levy, who founded The Score more than a decade ago to take on TSN and Sportsnet in the world of sports news and highlights, admits he's not sure whether the jerky is edible. But the face paint is fitting.
Industry watchers -- from analysts to network executives -- think Score Media is ripe for a takeout offer. In fact, with lucrative specialty channels now at the heart of the latest round of media consolidation in Canada, Mr. Levy might as well have a blue-and-gold bull's-eye painted on his forehead.
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The two mega-deals that have hit the TV sector in the past six months have focused on specialties. CTVglobemedia's $1.4-billion acquisition of CHUM Ltd. in July involved 21 specialty channels, including MuchMusic. The $2.3-billion purchase of Alliance Atlantis Communications this month by CanWest Global Communications and Goldman Sachs included 13, such as HGTV and Showcase.
The Score is the smallest player of Canada's three cable sports networks. Though its licence requires it to concentrate mostly on news and highlights, changes in recent years have allowed it to add live events, including college basketball and NBA games.
As a lesser-known part of the Alliance deal, CanWest also gets 22.3 per cent of Score Media's non-voting shares. That has sparked speculation CanWest may bid for the whole operation. Rumours were further stoked yesterday when CanWest bankers Genuity Capital Markets traded two large blocks of Score shares, prompting buzz CanWest -- or some other investor -- was acquiring a bigger stake.
Any would-be buyer of Score Media first has to persuade Mr. Levy to sell. The way the shares are structured, his family controls the board, which essentially prevents the firm from being forced into a deal.
"We've never considered ourselves just another little sports network out there whose sole purpose in life is to be targeted by the other guys," he said. "We've been in the fortunate position that we've always had the resources available to get us through the tough times, which we had a number of years ago when the network wasn't making money yet." But the channel is profitable now, and even before the Alliance takeover, analysts were pegging The Score as a strategic buyout for CanWest.
The Score resides in the most lucrative segment of the specialty dial -- sports. CanWest lacks a sports channel to compete against Rogers Communications' Sportsnet and CTVglobemedia's TSN, and Goldman, which is bankrolling most of the Alliance deal, has indicated it will back CanWest if it wants to purchase more specialty channels.
Investors appear eager to connect the dots. In the days since CanWest announced the deal on Jan. 10, Score Media shares have climbed almost 40 per cent with more than 20 times the average number of shares trading daily. Mr. Levy, leaning back in the chair in his office in downtown Toronto, says it all makes sense. "I'm not sitting here debating that." But consider this, he suggests: Score Media has been around for more than 10 years and has turned away suitors before. The first offer came before The Score even went on air, he said.
"We have an exciting future. We think this thing is going to increase in value dramatically over the course of the next one, two and five years," he said.
"Having said that, if somebody thinks this company has more value to them than it has to us, then we'll have to look at it . . . but we're not waiting around for anything."
Mr. Levy, a Hamilton-born lawyer who ran the family business, Western Co-axial Cable, in that city before selling to Cogeco in 1999, has never heard an offer for Score Media he didn't consider to be low-balling the value of the business.
He said he has no interest in selling cheap to pad his bank account and doesn't value the firm on today's prices. Score Media has a market capitalization of more than $140-million.
Instead, Mr. Levy says he is focused on the future value of the business. In the past few years, the TV operation has expanded into a free, online poker site (with no cash betting), a satellite radio channel that is also carried in the U.S., and a sports news service on BlackBerrys and cellphones. It raised $12-million a few months ago to fund the conversion to high-definition television and is planning a store-front studio in downtown Toronto.
For now, Mr. Levy sees CanWest as a partner on programming, rather than a suitor. While Alliance was a passive investor in Score Media, Global -- which has the rights to NFL football in Canada -- could bolster The Score's footprint in sports if the two can work out agreements, he said.
"Other companies have to make their own assessment as to what they think this thing is worth," he said. "And during the history, it's never matched what I thought it was worth, or what we think it's going to be worth as it keeps growing."
John Levy, CEO, Score Media
Age: 53
Business roots: Ran family's cable business in Hamilton before it was sold to Cogeco Inc. in 1999.
Education: University of Toronto, Law.
Little-known fact: A fanatic of standardbred horse racing.
Sports you play(ed): Basketball in high school, mostly golf now.
Colts or Patriots on Sunday?: "From everything I'm listening to on our network, it seems like people are saying it's the year of the Colts. But it's tough to pick against [Tom] Brady. I haven't decided."
GRANT ROBERTSON/THE GLOBE AND MAIL |
