Rogers Communications (TSX: RCI.b) has sold off a minority stake in its wireless division in exchange for a $7.0 billion equity investment.
The transaction has seen the major Canadian telecom operator sell the interest to a number of funds in a transaction led by Blackstone. Participants, which include CPP Investments, PSP Investments, British Columbia Investment Management Corporation and Caisse de dépôt et placement du Québec, will acquire a 49.9% equity interest in a new Canadian subsidiary of Rogers that will own a portion of Rogers’ wireless network.
Specifically, the subsidiary will own the Ontario and Alberta portions of the wireless backhaul transport infrastructure, as per a company spokesperson.
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The ownership interest allocated to Blackstone and the participating funds is expected to generate an estimated $400 million a year in the first five years of the arrangement. The figure is said to equate to an average cost of capital of 7% per annum for Rogers. Rogers meanwhile will retain a right to repurchase Blackstone’s interest in the subsidiary on the eighth and twelfth anniversaries of the transaction closing.
Rogers meanwhile is expected to still report its financial results on a consolidated basis and will maintain full operational control of the network.
Proceeds from the minority sale are expected to be used to repay debt, with the debt leverage ratio expected to be reduced by 0.7x following the close of the sale.
“This transaction will strengthen the company’s investment grade balance sheet by reducing our borrowings and unlocking the unrecognized value of critical assets. 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,” commented Rogers CFO Glenn Brandt.
Rogers Class B shares last traded at $36.71 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
