Rogers Communications Inc. RCI-B-T is selling its entire stake in Cogeco Inc. and subsidiary Cogeco Communications Inc. CCA-T for $829-million to the Caisse de dépôt et placement du Québec as the Toronto-based telecom looks to pay down debt after its takeover of Shaw Communications Inc.
The Caisse will then sell some of those shares to the public as well as back to Cogeco Inc. through a complex series of deals, leaving it with a 16.1-per-cent stake in Cogeco Communications.
The sale comes roughly three years after Rogers unsuccessfully attempted to acquire the Quebec-based cable company’s Canadian assets. The proposed takeover would have seen Rogers snap up Cogeco’s Canadian operations while New York-based Altice USA Inc. would have acquired the U.S. cable business, which has since been renamed from Atlantic Broadband to Breezeline.
The unsolicited joint bid, which was sweetened to $11.1-billion, failed to win the support of Cogeco executive chairman Louis Audet and his family, which controls the Cogeco companies through multiple voting shares. Mr. Audet repeatedly stated that the companies were not for sale, drawing support from the Caisse. The Quebec fund owned a 21-per-cent stake in Cogeco’s U.S. cable business, after investing US$315-million in 2017 to help pay for the purchase of a rival U.S. cable company.
Rogers, which first acquired a stake in Cogeco in 2000 as part of a deal that saw it swap cable assets with Calgary-based Shaw, is selling the stake in a private transaction roughly eight months after closing its contested $20-billion takeover of Shaw.
The sale of Rogers’s stake in Cogeco Inc. and Cogeco Communications to the Caisse will be accompanied by a series of transactions that will see Cogeco Inc. repurchase all of the Rogers Cogeco Inc. shares from the Caisse for $280-million.
Cogeco Inc. will finance the purchase in part by selling some of its stake in Cogeco Communications back to the subsidiary for $117-million, while selling another block of Cogeco Communications shares to the Caisse for $73-million.
The Caisse will sell 5.3 million of Cogeco Communications’ subordinate voting shares to the public via what’s known as a bought block trade. The sale will be run by a syndicate of investment banks led by CIBC Capital Markets and UBS Securities Canada.
Credit rating agencies have previously suggested that Rogers sell its Cogeco stake.
Rogers said in a press release Monday that the sale will allow the company to reduce its debt leverage ratio faster than previously forecast.
“This sale further demonstrates our commitment to strengthen our investment grade balance sheet and aggressively reduce our debt leverage ratio,” Rogers president and chief executive Tony Staffieri said in a statement.
Philippe Jetté, president and CEO of the Cogeco companies, said the deal presents “a unique opportunity for the Corporations to repurchase shares at an attractive price.”
“Given the current prices of our stocks, which we believe are undervalued, buying back shares represents an attractive use of our capital to build shareholder value,” Mr. Jetté said in a press release.
Kim Thomassin, executive vice-president and head of Quebec for the Caisse, also known as CDPQ, said the deal allows the fund to help support Cogeco’s growth. The Caisse, which has $424-billion of assets under management, has a dual investment mandate – promoting Quebec’s economic development while generating returns.
“This major share purchase, orchestrated by CDPQ, is key for the company and its plan to develop the North American market,” Ms. Thomassin said.
Shares of Cogeco Communications reached levels above $120 in mid-2021 but have since fallen, closing at $57.11 Monday on the Toronto Stock Exchange.
Alexandra Posadzki