Rogers Communications Inc. RCI-B-T +1.06%increase has struck a definitive agreement to sell a minority stake in its wireless infrastructure for $7-billion to a consortium led by New York-based Blackstone Inc. that also includes four of the country’s largest pension plans.
Last October, Rogers announced it planned to raise money and repay debt by selling a portion of its wireless backhaul business to an institutional investor, but did not disclose the investor’s identity.
On Friday, the Toronto-based company spelled out the details of the transaction, an innovative financing for a Canadian company that is expected to pave the way for further infrastructure sales at debt-heavy domestic telecom platforms.
Rogers is selling a 49.9-per-cent equity interest in its wireless unit to the Blackstone consortium, which also includes the Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec, the Public Sector Pension Investment Board and British Columbia Investment Management Corp., four of the country’s largest pension funds.
The Blackstone consortium will only hold a 20-per-cent voting interest in the new business, while Rogers will own 50.1-per-cent of the equity and an 80-per-cent voting interest.
“This transaction will strengthen the company’s investment grade balance sheet by reducing our borrowings and unlocking the unrecognized value of critical assets,” said Glenn Brandt, Rogers’ chief financial officer, in a press release. The transaction is expected to close in the second quarter of 2025.
The news was received positively by analysts Friday morning.
“We are encouraged to see a deal structure that on the surface seems to tick all of the boxes with respect to size, cost and impact,” said RBC analyst Drew McReynolds in a Friday morning note to investors.
In another note, Scotiabank analyst Maher Yaghi estimated the deal will reduce Rogers’ debt to EBITDA ratio by approximately 0.7 times. At the end of last year, Rogers debt was 4.5 times its EBITDA.
“All in, we expect the stock to react positively today as leverage is reduced with minimal negative impact on free cash flow,” he said.
Rogers took on debt to acquire rival Shaw Communications Inc. for $20-billion in 2023 and plans to spend $4.7-billion this year to acquire BCE Inc.’s stake in Maple Leaf Sports & Entertainment.
Blackstone, one of the world’s largest private equity funds with more than US$1-trillion in assets under management, is a significant investor in Canadian infrastructure and real estate and plans to continue committing capital to the country as a trade war plays out between the two intertwined North American economies.
“Canada is a hugely important market for investment at Blackstone and that has not changed,” said president Jon Gray in a recent interview with The Globe and Mail. “Obviously you have to be mindful of export-oriented businesses, but we are actively looking at a range of opportunities in the country today.”
Blackstone co-founder and chief executive officer Stephen Schwarzman openly backed U.S. President Donald Trump’s 2020 election campaign and is a significant donor to the Republican party and its leader.
The federal government hiked scrutiny of cross-border transactions last month in the wake of Mr. Trump’s decision to launch a trade war and campaign for an economic union that would make Canada the 51st state.
The structure of the Rogers transaction, with significant Canadian content, is meant in part to deal with regulatory concerns regarding control of telecom infrastructure.
Telus Corp. is using a similar structure to attempt to sell a 49-per-cent stake in its cell phone tower business, according to a pitch book on the potential transaction distributed by TD Securities, Telus’s financial adviser.
The transaction announced on Friday gives Rogers the right to repurchase the Blackstone consortium’s interest at any time between the 8th and 12th anniversaries of the deal’s closing.
Once launched, the wireless business is expected to pay the Blackstone consortium approximately $400-million annually for the next five years.
Mr. Yaghi estimated that, after accounting for cash taxes and potential interest savings tied to the debt repayment from the transaction, that figure drops to around $260-million to $280-million. On a net basis, this implies a maximum annual cash outlay of about $150-million over that period, he said.
Rogers said the Blackstone consortium’s investment is expected to be treated as equity by credit rating agencies Moody’s Investors Services, Inc., S&P Global Inc., and DBRS Ltd. Mr. Brandt said: “With this transaction, Rogers will have issued an aggregate $9-billion of equity-valued capital since year-end which is expected to reduce leverage by almost 1 turn.”
Rogers wireless infrastructure is an asset the company has pledged as security to lenders. On Friday, Rogers said as part of the sale to the Blackstone consortium, it would seek consent for amendments to the terms of its debt from the holders of its outstanding senior notes.
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