Rogers sells minority stake in Cogeco to CDPQ for $829 million

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Rogers Communications announced Monday it has agreed to sell all its shares in Cogeco to the Caisse de dépôt et placement du Québec for $829 million in an effort to keep its investment-grade rating.

Simultaneously, the Caisse announced it will become an “anchor investor in Cogeco Communications” after trading in Rogers’s shares in parent company Cogeco Inc.

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Under the agreement with the Caisse, Cogeco Inc. will buy back 5,969,360 subordinate voting shares of subsidiary Cogeco Communications from the Caisse, while Cogeco Communications will buy back 2,266,537 of its subordinate voting shares held by its parent company. The transaction sets the price of Cogeco shares at $46.91 and Cogeco Communications at $51.40, a 10 per cent discount on Monday’s closing prices.

After the transactions, the Caisse won’t hold Cogeco Inc. stock, but will have 16 per cent of subordinate voting shares of subsidiary Cogeco Communications. Rogers held 38 per cent of Cogeco’s equity and 24 per cent of Cogeco Communications.

The transactions don’t affect effective control over Cogeco Inc., whose founding Audet family and its company Gestion Audem held 69 per cent of voting interest. Cogeco Inc. has 84 per cent of voting rights over Cogeco Communications, according to the CRTC.

Rogers held large stakes in Cogeco Inc. and operating unit Cogeco Communications Inc. for many years in the hope of acquiring it one day, but the Audet family, which controls both entities, rebuffed its overtures — including a hostile bid in 2020.

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Instead, Rogers purchased Shaw Communications Inc. for about $20 billion. After that deal closed, Rogers was downgraded by S&P Global Ratings to BBB-, the lowest rung above junk. It’s similarly rated by Moody’s Investors Service, Fitch and DBRS Morningstar.

“This sale further demonstrates our commitment to strengthen our investment grade balance sheet and aggressively reduce our debt leverage ratio,” Tony Staffieri, Rogers’ chief executive, said in a statement. “We’re tracking six months ahead on our deleveraging priorities and we’re committed to reducing our debt leverage ratio even further.”

Rogers said it expects a debt leverage ratio of 4.7 by the end of the year, compared to 4.9 at the end of the third quarter.

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“This transaction is a unique opportunity for the corporations to repurchase shares at an attractive price to realize multiple benefits while ensuring we have the ability to deliver our strategic plan,” Cogeco CEO Philippe Jetté said in a statement. “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.”

S&P cut its outlook on Cogeco Communications to negative.

Cogeco is a major provider of telecommunications services in Quebec and Ontario, and owns U.S. cable provider Breezeline. It also owns 21 radio stations in Quebec.

“This sale further demonstrates our commitment to strengthen our investment grade balance sheet and aggressively reduce our debt leverage ratio,” Rogers CEO Tony Staffieri said in a statement. “We’re tracking six months ahead on our deleveraging priorities and we’re committed to reducing our debt leverage ratio even further.”

Bloomberg News and The Canadian Press contributed to this report.

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