- Rogers Communications (TSX:RCI) has signed an agreement with funds managed by Blackstone, backed by Canadian institutional investors, for a C$7 billion equity investment
- Rogers intends to use the net proceeds from the transaction to repay debt
- Following the transaction, Blackstone will hold a 49.9 per cent equity interest (with a 20 per cent voting interest) in the subsidiary, while Rogers will hold a 50.1 per cent equity interest (with an 80 per cent voting interest)
- Rogers stock (TSX:RCI.A/B) last traded at C$40.80
Rogers Communications (TSX:RCI) has signed an agreement with funds managed by Blackstone, backed by Canadian institutional investors, for a C$7 billion equity investment.
Under the terms of the transaction, Blackstone will acquire a non-controlling interest in a new Canadian subsidiary of Rogers that will own a minor part of Rogers’ wireless network. Rogers will maintain full operational control of its network and will include the financial results of the subsidiary in its consolidated financial statements. The investor group led by Blackstone includes Canada Pension Plan Investment Board (CPP Investments), Caisse de dépôt et placement du Québec, the Public Sector Pension Investment Board (PSP Investments), and British Columbia Investment Management Corporation.
Rogers intends to use the net proceeds from the transaction to repay debt. Following the transaction, Blackstone will hold a 49.9 per cent equity interest (with a 20 per cent voting interest) in the subsidiary, while Rogers will hold a 50.1 per cent equity interest (with an 80 per cent voting interest). At any time between the eighth and twelfth anniversaries of closing, Rogers will have the right to purchase Blackstone’s interest in the subsidiary.
The subsidiary is expected to distribute up to approximately C$0.4 billion annually to Blackstone in the first five years post-closing. Rogers’ average capital cost through to the end of the period for purchase is expected to be 7 per cent per annum.
The investment in a portion of Rogers’ wireless backhaul transport infrastructure will be reported as equity in Rogers’ consolidated financial statements and is expected to be considered an equity investment by Moody’s Investors Services, Inc., S&P Global Ratings, and DBRS Ltd.
“This transaction will strengthen the company’s investment grade balance sheet by reducing our borrowings and unlocking the unrecognized value of critical assets,” Glenn Brandt, Rogers’ CFO said in a news release. “With this transaction, Rogers will have issued an aggregate C$9 billion of equity-valued capital since year-end, which is expected to reduce leverage by almost one turn.”
The same day, the team announced that it had begun “consent solicitations” to amend the indentures governing certain of its outstanding US dollar-denominated and Canadian dollar-denominated notes, including notes originally issued by Shaw Communications Inc. in connection with the subsidiary equity investment.
Rogers Communications Inc. is a Canadian wireless, cable and media company that provides connectivity and entertainment.
Rogers stock (TSX:RCI.A/B) last traded at C$40.80 and has lost 26.35 per cent since this time last year.
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(Top photo via Rogers Communications Inc.)
