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Rogers Takes Control of Leafs, Raptors in $3.5 Billion Deal

(Bloomberg) -- Rogers Communications Inc. is buying BCE Inc.’s stake in Maple Leaf Sports & Entertainment Ltd. for C$4.7 billion ($3.5 billion), giving the telecommunications firm control of Canada’s most valuable sports company.

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Financing for the deal will include private investors and it won’t affect its debt leverage, Rogers said in a statement — though it’s not yet clear where it will get the money. BCE, parent of Bell Canada, plans to use the proceeds to reduce its debt.

The transaction, which values the owner of the Toronto Maple Leafs hockey club and Toronto Raptors basketball franchise at roughly $9.3 billion, is expected to close in mid-2025, pending league and regulatory approvals.

Wednesday’s deal signals an end to what was always an unlikely partnership between the two bitter rivals, who compete for wireless, television and internet customers and own dueling sports networks, BCE’s TSN and Rogers’ Sportsnet.

Rogers and BCE joined forces to buy out Ontario Teachers’ Pension Plan’s majority stake in MLSE in a C$1.32 billion deal announced in 2011. Each company holds 37.5% and they share the teams’ local broadcasting rights.

Canadian businessman Larry Tanenbaum holds a minority stake in the sports company, and the Ontario Municipal Employees Retirement System has a small, indirect stake through one of Tanenbaum’s companies.

Bell “reached out and asked us whether we’d be interested in purchasing their ownership interests and we were very interested — this is right on strategy for us,” Rogers Chief Executive Officer Tony Staffieri said in an interview, adding that it gives his company the chance to “consolidate control of the asset.”

While the deal came together relatively quickly, he said, “you can’t always pick the timing, but we seized the opportunity when it showed up.”

On the question of paying for the stake without increasing its debt leverage, Staffieri said: “There are a few financing options available to us that aren’t structured as debt, but we also intend to bring in private investors into the transaction.”

BCE rose as much as 4.6%, while shares of Rogers went in the opposite direction and were down 2.5% to C$54.11 as of 3:41 p.m. Toronto time.

Analysts noted that Rogers hasn’t said where it intends to find outside capital and might look to reduce its total ownership stake through an initial public offering. At least two analysts — Jerome Dubreuil of Desjardins Securities and Vince Valentini of TD Cowen — painted scenarios in which Rogers would eventually sell down its MLSE interest to just above 50%.

“Third party funding sources are not confirmed yet (they have 9-12 months to finalize details), but Rogers management is adamant that this purchase will be structured with minimal impact on debt leverage,” Valentini said in a report. He called it a “win-win sports transaction,” noting that Rogers, which also owns 100% of the Major League Baseball’s Toronto Blue Jays, will be able to consolidate its sports assets, which “should help their ability to raise third party funding for the assets.”

Balance Sheet Woes

For BCE, the deal is all about fixing its balance sheet, which has been strained amid weak growth.

“Today’s announcement demonstrates that we are focused on creating the financial flexibility to support our ongoing transformation and core growth drivers,” Chief Executive Officer Mirko Bibic said in a separate statement.

BCE’s debt load has become a concern for investors in recent months, with some questioning the sustainability of its dividend payout. Moody’s and S&P Global Ratings have downgraded their credit ratings on the company over the past month. The MLSE sale will likely end speculation about a possible dividend cut, Bank of Nova Scotia analyst Maher Yaghi said in a report.

Rogers and BCE currently share media rights for regional Leafs and Raptors games and that arrangement might continue for the next two decades. “Bell will have the opportunity to buy the content at market rates over the next 20 years. And to the extent they don’t, then we’ll look to other partners on that,” Staffieri said.

Tanenbaum sold 20% of his private holding company to Omers last year, giving the pension fund an indirect 5% stake in MLSE. At a price of $400 million, that transaction valued MLSE at $8 billion.

Keith Pelley, a former Rogers executive who became CEO of MLSE earlier this year, said in a statement the company has had “one of the very best ownership groups in sports and entertainment for many years,” adding he was “grateful for their contributions.”

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--With assistance from Stephanie Hughes.

(Updates with CEO comments, share prices, analyst comment.)

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