TORONTO — If you thought recent mergers in the U.S. broadcast television industry were huge, hold on to your hats — and watch those Loonies and Toonies that are about to be exchanged between two of Canada’s largest media conglomerates.
Rogers Communications — founded 59 years ago by Ted Rogers with his establishment of CHFI-FM in Canada’s largest market — is merging with Shaw Communications in a deal valued at $20,840,000,000 in U.S. dollars.
To call it a blockbuster deal may even be an understatement.
Rogers is unlike any U.S. media company, thanks to grandfathered arrangements that pre-date regulatory limits on ownership. It operates a successful MVPD business built in some 30 years ago through self-growth and the acquisition of smaller companies boasting important fiber optic connectivity, including Toronto’s Newton Cable.
It also offers wireless communication services boasting Canada’s largest 5G network, by far its biggest segment by revenue and adjusted EBITDA.
Then, there’s the Rogers Sports & Media subsidiary, with television holdings including the Citytv network, with 83% national coverage; multicultural network OMNI Television; Sportsnet; and the Canadian versions of the FX, FXX and OLN cable networks. Its radio holdings include founding station CHFI, today a leading Adult Contemporary station and part of a two AM-two FM Toronto cluster including all-News CFTR-AM, “Sportsnet 590 The Fan” CJCL-AM, and Top 40 CKIS-FM “Kiss 92.5.” It owns 54 radio stations across five provinces.
Rogers Sports & Media also includes French-language and English-language segmented digital advertising networks; ad representation of St. Joseph Communications’ print magazines including heralded news weekly Maclean’s.
There’s more: Since 2000 the Toronto Blue Jays baseball club has been owned by Rogers, although reports surfaced in 2017 that they were seeking to sell it. It has owned the Blue Jays’ home, Rogers Centre (formerly Skydome) since 2004.
Furthermore, Rogers enjoys a 12-year Canadian licensing agreement with the National Hockey League. This includes national TV rights for all NHL games within Canada across various platforms.
Then, there’s Rogers’ 37.5% ownership interest in Maple Leaf Sports & Entertainment Ltd. (MLSE), which owns the Toronto Maple Leafs, the Toronto Raptors, Toronto FC, the Toronto Argonauts, and one of several minor league hockey franchises in Toronto, the beloved Marlies.
Oh, and Rogers has a bunch of real estate holdings tied to its many commercial assets.
Not content with all of that, Rogers now sees CRTC and Ottawa federal approval of a deal that will make it a bigger wireless carrier in Canada, as Shaw’s services are wholly focused on internet, mobile/telephony and cable TV services.
Shaw’s focus has largely been in Canada’s two most populous western provinces, British Columbia (home to Vancouver) and Alberta. It is headquartered in Calgary.
And, a January 2013 agreement paved the way for today’s multi-billion Loonie link-up between Shaw and Rogers.
AN EIGHT-YEAR WAIT ENDS
Back when Stephen Harper was Prime Minister, Shaw agreed to sell to Rogers its Mountain Cablevision Ltd., which serves the Hamilton market of Ontario, just west of the Buffalo-Niagara Falls, N.Y., market.
Importantly, the 2013 deal granted Rogers an option to acquire Shaw’s spectrum licenses for advanced wireless services in British Columbia, Alberta, Saskatchewan, Manitoba and northern Ontario. That same arrangement allowed Shaw to acquire Rogers’ 1/3 stake in TVtropolis.
With Rogers’ Class A and Class B shares each soaring following Monday’s opening bell on the TSX, investors are still digesting what for the U.S. market would be akin to Comcast purchasing CenturyLink — if the U S West cellular brand still existed.
Terms of the Shaw merger see Rogers agreeing to purchase all outstanding Class A Shares and Class B Shares of Shaw for $40.50 per share in cash.
That’s tremendous, as Shaw shares, which trade on the NYSE, closed on Friday at $27.47. Just 15 minutes into trading on Monday (3/15), a 43.3% share jump was underway, as Rogers’ offer reflects a stunning 70% premium to Shaw’s Class B Share price.
With Shaw’s wireless assets, Rogers plans to invest at minimum $2.5 billion CDN in Western Canada to build “critically needed” 5G networks, connect underserved rural and Indigenous communities, and bring “added choice” to customers and businesses even as it gobbles up Shaw. As the FCC in the U.S. is committed to the buildout of 5G in rural areas, a similar mega-merger could come to fruition — should the Justice Department and Federal Communications Commission deem it in the public interest and free of monopolistic characteristics that can still be found to the north and to the south, in Mexico.
Bolstering Rogers’ argument: New technology and network investments it plans to make “will create up to 3,000 net new jobs across Alberta, British Columbia, Manitoba and Saskatchewan.”
The $26 billion CDN deal (or $20.84 billion USD) includes $6 billion CDN in Shaw debt.
And, in another sign of just how different Canada is from the U.S., Rogers has secured committed financing to cover the cash consideration.
Pro forma leverage on closing is expected to be just over 5x, and Rogers expects to maintain its investment grade rating.
What’s next for the Shaw family? For starters, they will become one of the largest shareholders in Rogers.
Shaw Communications Chairman/CEO Brad Shaw, and another Director to be nominated by the Shaw family, will join the Rogers Board of Directors when the transaction closes.
Rogers has retained BofA Securities and Barclays as its financial advisors and Goodmans LLP as its legal advisor. Torys LLP is the legal advisor to the Rogers Control Trust.
Shaw has retained TD Securities Inc. as its exclusive financial advisor and Davies Ward Phillips & Vineberg LLP and Wachtell, Lipton Rosen & Katz as its legal advisors. CIBC World Markets Inc. is acting as independent financial advisor to the Special Committee and Burnet, Duckworth & Palmer LLP is independent legal advisor to the Special Committee. The Shaw Family Living Trust has retained Dentons Canada LLP as its legal advisor.
Following CRTC and Ottawa’s federal review, the deal is expected to close in the first half of 2022.
ONWARD FROM ALTICE
The Shaw/Rogers transaction comes following the November 2020 expiration of an unsolicited $8.4 billion CDN merger offer to merge Cogeco Media of Québec with Rogers Communications.
Montréal-based Cogeco is the owner of 23 radio stations across the Canadian province of Québec. And, Rogers’ non-requested, non-binding proposal involved Altice USA, the parent of digital-first news network Cheddar and MVPDs Suddenlink and Optimum.
For Rogers, it would have given its Rogers Sports & Media an important entry into Montréal.
Reporting by Carina Newton in Toronto, Faith Newton in Calgary, and Adam R Jacobson in Boca Raton, Fla.
