Rogers Communications, a major Canadian telecommunications player, has entered into a notable transaction with a Blackstone-led consortium. The agreement involves a CAD $7 billion equity investment aimed at bolstering Rogers’ financial standing. This move comes after its recent acquisition of Shaw Communications for $20 billion, furthering its market presence in Canada.
The agreement enables Blackstone to purchase a 49.9% non-controlling stake with 20% voting rights in a newly formed Rogers subsidiary. This entity will manage part of Rogers’ wireless backhaul transport network. However, Rogers will retain operational control and include the subsidiary’s performance in its financial results.
Prominent Canadian pension funds like CPP Investments and Caisse de dépôt et placement du Québec are involved in this investment. Tony Staffieri, President and CEO, emphasized the strategic partnership’s significance, stating it shows investor confidence in Rogers’ assets and their commitment to debt reduction. According to CFO Glenn Brandt, “This transaction will strengthen the company’s investment grade balance sheet by reducing our borrowings and unlocking the unrecognised value of critical assets.”
In financial terms, this move is noteworthy. The added capital underlines a plan to strengthen Rogers’ financial health by reducing debt almost by one full turn, and signifies issuance of $9 billion in equity-valued capital within a short timeframe. An interesting aspect is Blackstone’s potential to receive up to CAD $400 million annually over the first five years.
From Blackstone’s perspective, the first five years guarantee substantial annual distributions. Additionally, Rogers retains the buyback option of Blackstone’s stake from the eighth to twelfth year post-deal closure, providing strategic flexibility. Credit rating agencies like Moody’s and S&P may treat this agreement as equity, possibly impacting Rogers’ credit standing positively.
