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Cash Store shares get bounced

Also: why the Comcast-Time Warner tie up could be a template for a similar deal in Canada involving Alberta's favourite cable company

When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at mfawcett@albertaventure.com

Feb 18, 2014

by Max Fawcett

Shares of Cash Store Financial (TSE:CSF) are getting massacred – and no wonder. The payday lender’s ability to operate in Ontario, one of its biggest markets, has been placed in question after the province’s Registrar of Payday Loans said it wanted to deny new licences to the company. The value of the company’s shares has been chopped in half over the last week alone, and they’re down more than 65 per cent so far in 2014 and more than 80 per cent compared to this date last year. The company has said it wants a hearing before the province’s License Appeal Tribunal, but given its track record in the province (and apparent willingness to flaunt its payday loan regulations by offering lines of credit) it’s safe to say that company will face an uphill battle there. Indeed, the most likely scenario for the company is one in which it’s forced to sell off its Ontario assets at a considerable discount, retrench in other markets and hope that it can survive the experience.

Meanwhile, the blockbuster merger south of the border between Time Warner and Comcast has revived the idea that a similar marriage of convenience could take place here in Canada. The partners? Rogers Cable and Shaw Cable. As the Financial Post’s Christine Dobby noted last week, the logic behind the Time Warner-Comcast tie up does apply to Shaw and Rogers. “The scale benefits of consolidation in Canada are no different than in the United States and Europe, where similar deals between cable operators have been struck….and pricing pressure from over-the-top video streaming services like Netflix will also drive mergers.”

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But, as Dobby wrote, Greg MacDonald, a managing director at Macquarie Capital Canada, doesn’t think Shaw shareholders should expect to see a premium attached to their positions any time soon. “For one, the valuation premium afforded in the Comcast/Time Warner deal is not as high as the premiums seen in a wave of mergers in the 1990s, Mr. MacDonald said. ‘Plus, in Canada, you’ve got far lower bid tension potential because you have fewer potential acquirers of Shaw.’”

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