Rogers plans to repay debt after $7 billion deal selling 49.9% stake in wireless backhaul business
Rogers Communications Inc. has agreed to sell a 49.9 percent equity interest in a new subsidiary that will hold part of its wireless backhaul transport infrastructure.
The $7bn equity deal is led by Blackstone Inc. and includes participation from Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec, Public Sector Pension Investment Board, and British Columbia Investment Management Corp., as reported by BNN Bloomberg.
As stated in all three sources, Rogers will retain a 50.1 percent stake and maintain operational control over its wireless network. The deal excludes Rogers’ spectrum holdings and cell towers.
The company will also hold an 80 percent voting interest, while the Blackstone-led group will have a 20 percent voting interest, The Globe and Mail reported.
According to BNN Bloomberg, Rogers noted that the investment would be treated as equity and would not affect its credit ratings.
The company also stated that Moody’s Investors Services Inc., S&P Global Inc., and DBRS Ltd. are expected to treat the investment as equity, as confirmed by The Globe and Mail.
Rogers said in a press release that proceeds from the transaction will be used to repay debt.
“With this significant investment, we are executing on our commitment to de-lever our balance sheet,” said president and chief executive officer Tony Staffieri, as quoted by all three sources.
Brandt, the company’s chief financial officer, stated in the same release that the deal “will strengthen the company’s investment grade balance sheet by reducing our borrowings and unlocking the unrecognized value of critical assets,” according to The Globe and Mail.
Staffieri also previously referred to the transaction as a “first of its kind” in Canada, according to BNN Bloomberg, and said the funds would help reduce leverage ahead of a planned US$4.7bn purchase of a 37.5 percent stake in Maple Leaf Sports & Entertainment Ltd. from BCE Inc.
Mobile World Live reported that the wireless subsidiary is expected to pay the Blackstone consortium approximately $400m annually over the first five years following the deal’s close.
As reported by The Globe and Mail, Rogers has the right to repurchase the consortium’s interest between the eighth and 12th anniversaries of the deal’s closing.
RBC Capital Markets analyst Drew McReynolds commented in a note that the transaction “ticks all of the boxes with respect to size, cost and impact.”
Analysts estimate the deal will reduce Rogers’ debt-to-EBITDA ratio by approximately 0.7 times. At the end of 2024, the company's debt was 4.5 times EBITDA, the same source reported.
The Globe and Mail noted that the structure, which includes significant Canadian institutional investment, is partly intended to address regulatory scrutiny of cross-border transactions.
This comes amid increased attention from Ottawa following former US President Donald Trump’s trade war stance and political campaign for an economic union with Canada.
In an interview with The Globe and Mail, Blackstone president Jon Gray said, “Canada is a hugely important market for investment at Blackstone, and that has not changed.”
Geoffrey Souter, managing director and head of real assets credit at CPP Investments, said the transaction highlights the fund’s ability to invest at scale in large, long-term real assets.
He added, “We look forward to supporting Rogers’ critical backhaul network in Canada,” which he said is “well positioned amid growth in mobile data usage.”
Telus Corp. is pursuing a similar structure for its cellphone tower business, based on a pitch book circulated by TD Securities.
