With financial markets imploding, the question arises, which Canadian media stock will next fall into the hands of an acquisitive Entertainment One?

After all, Entertainment One’s $68-million reverse takeover of DHX Media unveiled Sept. 29 was as much about securing a Toronto Stock Exchange listing as going after undervalued Canadian media companies amid the current market meltdown and industry consolidation.

And Darren Throop, CEO of E1, foresees more opportunities in the current market turmoil to pick up undervalued Canadian media players.

‘Obviously, we’re focused on the media space, but with what has happened with the value of these businesses, we feel there’s more value than what’s been recognized in the current stock prices,’ he said in the wake of the deal for DHX, which still requires shareholder approval.

Shares in DHX rose sharply Sept. 29 on the Toronto Stock Exchange, up $0.15 or 17% to $1.00 during afternoon trading.

E1, which is backed by Britain’s Marwyn Investment Management, is bidding $1.59 per share for DHX stock, which represents a significant premium.

Michael Donovan, the outgoing DHX CEO, explained that the reverse takeover with E1 made sense, as recent declines in DHX stock prices threatened to limit the company’s room to maneuver as a publicly traded company.

‘From our point of view, we needed to use the shares as a currency. And if they get written down to nothing, they’re useless. So we had to fast-forward our size overnight,’ he said of the decision that cost him control of his company, but assured its future.

Throop agreed that size matters as troubled banks and melting credit markets push stock prices down on financial markets.

‘There’s a disconnect between the intrinsic value of businesses. The markets have been sideswiped. And Michael recognized that consolidation and a bigger play makes good sense, and there’s lots of synergies between his company and our own,’ he argued.

Conversely, Throop is betting the hidden value of companies like DHX, when folded into E1’s expanding TV division, will be realized over time.

‘We think when the market corrects, and we continue to deliver solid results, we will get recognized for the value we’ve created,’ Throop said.

The E1 boss was giving nothing away on possible takeover targets going forward.

‘There’s a lot of opportunities that come across our desk. We will certainly continue to be aggressive in looking to expand our business, organically and through acquisitions,’ he said.

Rival Canadian media stocks that have experienced sharp drops in price amid the current market roller-coaster include Peace Arch Entertainment, Canwest and Score Media. They and other market laggards have sought combinations or collaboration with bigger players, or outright sales or mergers, to survive in the current market.