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Shares of BCE (BCE.TO)(BCE) rose on Wednesday while Rogers Communications’ (RCI-B.TO)(RCI) stock dipped, after it was announced that Rogers will buy BCE’s minority stake in Maple Leaf Sports and Entertainment (MLSE) for $4.7 billion.
BCE’s stock rose as much as five per cent in early trading Wednesday, before paring gains. It finished the trading day up three per cent on the Toronto Stock Exchange compared to Tuesday’s close. Shares of Rogers fell as much as four per cent, with the stock ending at $54 per share, a drop of three per cent compared to Tuesday’s close.
BCE had previously been viewed as a “potentially more motivated seller” of its stake in MLSE. Under the terms of the deal, which is subject to various approvals and expected to close mid-2025, Bell Media will have content rights to broadcast the Toronto Maple Leafs and Toronto Raptors on TSN for the next 20 years. TSN will also continue to broadcast Toronto FC and Toronto Argonauts games through independent agreements with their respective leagues.
BCE said on Wednesday it intends to use the proceeds from the sale to reduce debt levels, as well as “support its ongoing transformation from telco to techco with a focus on core growth drivers.”
The decision to sell its MLSE stake comes after Moody’s Ratings downgraded BCE’s credit rating in August, due to the company’s “high financial leverage and limited deleveraging ability.”
“Bell Canada has consistently moved Debt/EBITDA up annually since 2019 and has not demonstrated any commitment to deleveraging while maintaining a dividend growth model, which raises governance risk and is a factor that drives the rating downgrade,” Moody’s analyst Peter Adu wrote last month in a research note.
Scotiabank analyst Maher Yaghi wrote in a research note on Wednesday that the deal is positive for BCE, allowing the company to use the proceeds to reduce debt levels.
“This will likely also eliminate speculation about a possible dividend cut at BCE, which we did not believe was a realistic assumption to begin with,” Yaghi wrote in the note.
RBC Capital Markets analyst Drew McReynolds notes that the $4.7 billion price tag represents “a considerable gain” for BCE compared to the $533 million it paid in 2011 for the equity stake in MLSE.
“The 20-year agreement should protect the value of TSN and thus Bell Media and we believe the transaction provides much-needed clarity around BCE’s balance sheet and deleveraging path through the medium term,” McReynolds wrote.
For Rogers, the transaction will give it a 75 per cent ownership of MLSE, making it the majority owner of Toronto’s major sports teams, on top of its ownership of the Toronto Blue Jays. MLSE chairman Larry Tanenbaum owns the remaining 25 per cent through his holding company Kilmer Sports, with Canadian pension fund OMERS owning 20 per cent of the holding company.
Yaghi wrote on Wednesday that “Rogers could look to buy out Tanenbaum’s stake in or before mid-2026, when the put option is exercisable.”
“This would enable Rogers to potentially bring every major Toronto sports franchise under one umbrella, which could garner interest from outside investors or be IPOed, potentially unlocking significant upside to Rogers,” Yaghi said.
Rogers says financing for the deal will not affect the company’s debt leverage, and that it will include private investors.
“We believe this transaction bolsters Rogers’ existing sports assets (including the Blue Jays), providing support for an eventual crystallization of these assets over the medium term,” McReynolds wrote.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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