UPDATE 1-Teletubbies' DHX buys kids TV channels from BCE, shares surge

Thu Nov 28, 2013 3:05pm EST
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By Euan Rocha

TORONTO Nov 28 (Reuters) - Teletubbies owner DHX Media said on Thursday it will acquire Family Channel and three other children's channels from BCE's Bell Media for C$170 million in cash, adding content distribution to its current capabilities.

The deal, cheered by analysts and investors, sent DHX shares surging 38 percent to a lifetime-high of C$5.74 in morning trading on the Toronto Stock Exchange.

Halifax-based DHX, which creates, produces or licenses, children's shows such as Teletubbies, Yo GabbaGabba and Caillou, said the deal will boost its earnings and give it a stable stream of subscription-based revenue.

RBC Capital Markets analyst Haran Posner described the deal as "transformational," noting that DHX is paying a very attractive price for high quality assets.

"The acquisition strengthens DHX's core content businesses, providing the company with a distribution channel to promote its own family and kids brands," he said in a note to clients.

Cormark Securities analyst David McFadgen boosted his rating on DHX to "buy" from "market perform." DHX shares were up 26 percent at C$5.27 in afternoon trading on the TSX.