Rogers buys BCE’s stake in MLSE for $4.7-billion

Rogers Communications Inc. RCI-B-T is taking control of professional sports in Toronto by acquiring rival BCE Inc.’s BCE-T stake in Maple Leaf Sports & Entertainment for $4.7-billion.

Rogers is purchasing Bell Canada parent BCE’s 37.5-per-cent stake in MLSE, owner of the NHL’s Maple Leafs, NBA’s Raptors, CFL’s Argonauts and MLS’s Toronto FC, after sharing ownership of the company for the past 12 years. Bell decided to sell the holding to pay down debt and invest in its telecom business. The transaction values MLSE at $12.5-billion, setting a new high-water mark for the price of Canadian sports franchises.

“These are iconic teams and we are excited at the opportunity to increase our ownership,” said Rogers chief executive officer Tony Staffieri in an interview. He said Bell “decided to sell, they made an outreach to us, and we took the opportunity.”

Rogers, the country’s largest cable company, is seeing customers cut the cord and switch to streaming services and online viewing. Mr. Staffieri said live sports are a critical part of Rogers’s strategy of winning and retaining subscribers and having control of MLSE “will make it easier for fans and viewers to watch what they want, when they want.”

In April, Rogers struck a 10-year agreement with U.S. telecom Comcast Corp. to offer Canadian customers devices meant to simplify home viewing. Mr. Staffieri said part of the reason for investing in the technology, marketed under the Xfinity brand, is it allows sports fans easy access to games, on any platform.

Rogers already owns MLB’s Toronto Blue Jays and the Sportsnet television network. The Toronto-based telecom company will own 75 per cent of MLSE if regulators and sports leagues sign off on the purchase from Bell, which is expected to close by the middle of next year.

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Rogers has the right to buy the remaining 25 per cent of MLSE from chairman Larry Tanenbaum in 2026. On Wednesday, Mr. Staffieri and Mr. Tanenbaum declined to comment on MLSE’s future ownership.

Last year, Mr. Tanenbaum sold 20 per cent of his holding company Kilmer Sports Inc., which owns his MLSE stake, to pension fund manager OMERS for US$400-millon. The transaction valued MLSE at US$8-billion, or 16 per cent less than what Rogers is paying Bell.

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Rogers executive chairman Edward Rogers has long sought to control all of Toronto’s major sports franchises as part of a strategy to marry sports content with cellphone and cable services.

“Winning is everything for fans, and that’s why we’re committed to investing to bring more championships to Canada,” Mr. Rogers said in a press release on Wednesday. “We’re passionate about sports and we’re passionate about winning.”

Putting one owner in charge of Toronto’s teams increases their chances of winning championships, and makes business sense, according to former MLSE chief executive officer Tim Leiweke. The Maple Leafs, who opened their training camp on Wednesday, haven’t lifted the Stanley Cup since 1967. The Raptors, Argos and Toronto FC have all won championships in recent years.

“Edward’s the right guy. It gets the structure of the organization like it should be for sports teams,” said Mr. Leiweke in an interview. “Now they don’t have to run it by committee.”

“When you combine MLSE with the Jays, just having those assets in the same portfolio, I think it’s the crown jewel of sports. I don’t think there’s any other property that’s as attractive,” Mr. Leiweke said.

At the Maple Leafs’ camp on Wednesday, team president Brendan Shanahan played down Rogers’s purchase, saying: “I don’t really think it changes anything.”

The shared challenge for players and management is “how can we get to our ultimate goal of winning the Stanley Cup?” Mr. Shanahan said. “As far as the ownership announcement today, their focus and their goal are shared by me, and they’re very supportive.”

Last month, credit rating agency Moody’s downgraded BCE’s debt rating to the last level above junk-bond status, citing the company’s high debt levels and limited ability to improve the situation. On Wednesday, BCE chief executive officer Mirko Bibic said in a press release: “Today’s announcement demonstrates that we are focused on creating the financial flexibility to support our ongoing transformation and core growth drivers.”

Why BCE was forced into selling its MLSE stake to arch-rival Rogers

Once Rogers closes the MLSE purchase, analysts predict the telecom company will attempt to cash in on the value of its sports and media properties by selling a minority stake in an initial public offering (IPO).

“Today’s announcement is an initial step in a longer-term process to surface value in Rogers’ sports properties,” analyst Tim Casey at BMO Capital Markets said in a report. “Our working assumption is that the end game is to spin out or IPO a separate entity that includes MLSE, the Toronto Blue Jays, and some broadcast/media assets.”

Last year, Rogers acquired Calgary-based cable company Shaw Communications Inc. in a debt-financed $20-billion acquisition. Since then, Rogers executives have put a priority on paying down loans.

On Wednesday, Mr. Staffieri said the MLSE purchase will not increase Rogers’s debt leverage and the company has lined up wealthy individuals and institutional investors as potential investors in MLSE. He declined to name potential partners. Analysts said Rogers could tap content-hungry tech platforms such as Amazon.com Inc. as minority investors.

“We believe funding will likely be a combination of increased private equity participation in MLSE, additional asset sales, and also likely a content deal with a streamer such as Amazon which has been looking to secure more sports content for online streaming,” analyst Maher Yaghi at Bank of Nova Scotia said in a report.

In April, Rogers sold exclusive rights to broadcast Monday night NHL games to Amazon’s Prime Video service over the next two seasons, starting in October, 2024.

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Rogers and Bell need two regulators – the Competition Bureau of Canada and the Canadian Radio-television and Telecommunications Commission – to sign off on the transaction. The Competition Bureau attempted to block Rogers’s purchase of Shaw, but was overruled by the Competition Tribunal.

On Wednesday, a spokesperson for the bureau confirmed the agency will be reviewing the MLSE deal. In a statement to The Globe and Mail, Sarah Brown said: “It is difficult to say how long this particular review will take, as the Bureau evaluates the steps that need to be taken on a case-by-case basis. Nonetheless, we work to complete our reviews as expeditiously as possible.”

Bell is selling its MLSE stake while retaining the rights to broadcast Leafs, Raptors and Argos games for the next 20 years on its media outlets, including television sports network TSN. Mr. Yaghi said: “BCE has long indicated that it is a willing seller of MLSE as long as a transaction would not jeopardize its content sourcing for sports.”

With a report from Alexandra Posadzki

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