Rogers buys out Bell’s stake in MLSE (37.5%, US$3.5B)

[ORRFForever]

You worry about the Argos?

Really?

I worry about Bell. I hate Bell, but they're in big trouble.


Rogers is a flash in the pan. Easy come, easy go. That's their MO.

I hate Rogers, too. I'm a double-hater, Canadian style.

I love the CFL so, yes, I worry about the Argos.

Re : "I worry about Bell. I hate Bell, but they're in big trouble."

^ I don't understand that statement. ^

Re : "Rogers is a flash in the pan. Easy come, easy go. That's their MO."

???

 

[ORRFForever]

*Ed(ward) Rogers, not Ted. Ted was his late father (who's formal name was, of course, also Edward because... old money things).

But, yes, I think you hit the nail on the head.

Everyone is talking about the business implications, but Ed muscled out his mother and siblings from the company board and has had some strong opinions about how to run the Leafs/Raptors over the past few years (see the whole saga over extending Masai Ujiri's contract).

This looks like a personal decision to me: Ed wants to run sports franchises. The Leafs/Raptors may once again have, for all intents and purposes, an individual as owner.

But at what cost? How much debt can Rogers take on? They are playing in a very small sandbox (Canada) where the financial upside is limited. If Rogers owned 100% of the company, they could do what they want, but it is publicly traded and they only own <10% of the B-shares.

Given that the company only had $330,000,000 on hand at the end of June, they're going to have to borrow, AGAIN, to buy out BCE. In the future, if they decide to sell off MLSE, who's left to buy it?

Again, I'll bow to the Rogers on this decision, but I don't get it.

 

[ColinM]

I disagree.

I could see MLSE selling the Argos to BCE/TSN for $1. After that, in order to keep the CFL alive and fill TSN's summer schedule, BCE would run the Argos. They've done it before... a few times.

TSN's summer schedule is empty minus the CFL. The CFL, as far as TV packages are concerned, is dirt cheap, so losing money on the Argos would be a rounding error on BCE's balance sheet.

Plus, Rogers does not want to be known for killing the Argos. Why not just give them to BCE, the competition, knowing BCE will lose money.

It's sad that the argument for continuing the Argos hinges on them being sold for a dollar.

I don't know if TSN's summer schedule is that empty though. They have Grand Slam Tennis and international Soccer tournaments.

I'd be curious to know what would generate better ratings on a Thursday Night in July. Yankees vs Red Sox (which could be licensed from Rogers) or Argos vs any team not named Ti Cats or Roughriders.

 

[Melrose Munch]

And shit, even the latest to the party little sister franchise in the Clippers, with them moving into a new and shiny arena in Inglewood, are still going to be treated as second fiddle to the Lakers at best, even taking into account with the practically endless resources Steve Ballmer has. The Chargers are paying people to be fans, and are learning that being in the same stadium as a more popular team with relative (even if by this point, it's distant) history in LA is a worse fate then what they made for themselves in San Diego.

I think with Chargers Rams the Chargers did it to themselves. They should have taken the downtown SD stadium. Of course, there are way more potential fans now (especially if they keep winning), but at least the Raiders didn't move to LA, they would be DOA.

 

[Golden_Jet]

BCE is just paying off debt. The stock market is happy.

They’ll also be trying to get the rights in the next deal, according to Eric Macramella (sports business lawyer) on the radio yesterday.

 

[Melrose Munch]

They’ll also be trying to get the rights in the next deal, according to Eric Macramella (sports business lawyer) on the radio yesterday.

With what money? Have you seen their balance sheet? There's a lot of red.

 

[Golden_Jet]

With what money? Have you seen their balance sheet? There's a lot of red.

Roger’s debt is worse.

 

[Melrose Munch]

Roger’s debt is worse.

Right we're talking Bell. They don't have the money to take the entire TV contract. Amazon will play a factor and even Apple TV.

 

[varsaku]

I definitely think that line of reasoning is a fair one, but therein lies the rub: sure, if you look at it from a thirty thousand foot view, everything about a Canadian hockey game is CanCon. But the ultimate issue is that the profits that come from that bit of CanCon goes into the pockets of people in Silicon Valley, and not into the pockets of Canadian corps. It's a very stupid debate when you look at it like that, but that's really why I brought up the CRTC to begin with. You're already starting to see the feds push back against Meta and Google WRT how news from Canadian outlets is disseminated on their platforms, and it's left these corps angry that they aren't slavishly being catered to. I can certainly see some very loud elements of the Conservative base (as much as they looooove consistently dangling the idea of defunding the CBC) wondering why residual profits from Canada's national game are going to someone in Silicon Valley instead of Bay Street.

By that logic wouldn't these rights fees paid to the NHL be actually leaving the country to go to NYC where the NHL is headquartered.

 

[aqib]

Chargers/Rams is a perfect example because they entered the LA market at the same time and had no recent fan loyalty to contend with (at least not from anyone under 50). By circumstance, the Rams got the early edge in the competition for fans, and that has very quickly translated into a completely one-sided relationship which will probably last as long as they’re both in LA. It was almost like a lab experiment to prove that the early bird gets the worm when it comes to brand loyalty in the sports market.

It’s the same reason that it will not ever matter what the Mets do, even if they win 10 championships in a row, most of the market will be thinking “wow, that’s 10 World Series in a row for the Mets, what does this mean for the Yankees?”

A new NHL team in Toronto would have the same dynamic, possibly even more exaggerated as the Leafs utterly dominate that market even moreso than any team could dominate NYC or LA.

The Chargers still make more money in LA than they would have in San Diego without having any stadium associated debt they would have if they had to pay for a stadium there. While Forbes isn't the end-all-be-all in terms of team finances but they have the Chargers ahead of Baltimore in income. So yeah being a second team in some markets can be more lucrative than being #1 in others. Would you rather own Ontario 2 or Arizona 1? The NHL admitted an NHL team in Hamilton would be top 5 in value.

I disagree on the Mets/Yankees. The Met were routinely outdrawing the Yankees in the late 80s/early 90s. This was despite the fact that American League counted tickets sold while the National League counted only fans actually in attendence. If the Mets had gone on a Yankees type run in the late 90s/early 00s while the Yankees spent a couple of decades mired in mediocrity the Mets would be the dominant team in town.

I think with Chargers Rams the Chargers did it to themselves. They should have taken the downtown SD stadium. Of course, there are way more potential fans now (especially if they keep winning), but at least the Raiders didn't move to LA, they would be DOA.

Are you serious? The Raiders STILL have a bigger following in LA than the Chargers and Rams do. When they play there its like a home game. Thats why the NFL gave the Chargers first crack to join the Rams

 

[varsaku]

The Chargers still make more money in LA than they would have in San Diego without having any stadium associated debt they would have if they had to pay for a stadium there. While Forbes isn't the end-all-be-all in terms of team finances but they have the Chargers ahead of Baltimore in income. So yeah being a second team in some markets can be more lucrative than being #1 in others. Would you rather own Ontario 2 or Arizona 1? The NHL admitted an NHL team in Hamilton would be top 5 in value.

I disagree on the Mets/Yankees. The Met were routinely outdrawing the Yankees in the late 80s/early 90s. This was despite the fact that American League counted tickets sold while the National League counted only fans actually in attendence. If the Mets had gone on a Yankees type run in the late 90s/early 00s while the Yankees spent a couple of decades mired in mediocrity the Mets would be the dominant team in town.


Are you serious? The Raiders STILL have a bigger following in LA than the Chargers and Rams do. When they play there its like a home game. Thats why the NFL gave the Chargers first crack to join the Rams

Clippers would also be a great example where the 2nd team while significantly behind in success and fanbase, is among the most valuable and in revenue.

 

[ORRFForever]

I'd be curious to know what would generate better ratings on a Thursday Night in July. Yankees vs Red Sox (which could be licensed from Rogers) or Argos vs any team not named Ti Cats or Roughriders.

Definitely the Argos. The CFL does well in the ratings.

TSN won't let the Argos or the CFL die. One, there is a longtime partnership. Two, the CFL provides a ton of summer content for TSN. A win-win.

 

[Yukon Joe]

*Ed(ward) Rogers, not Ted. Ted was his late father (who's formal name was, of course, also Edward because... old money things).

But, yes, I think you hit the nail on the head.

Everyone is talking about the business implications, but Ed muscled out his mother and siblings from the company board and has had some strong opinions about how to run the Leafs/Raptors over the past few years (see the whole saga over extending Masai Ujiri's contract).

This looks like a personal decision to me: Ed wants to run sports franchises. The Leafs/Raptors may once again have, for all intents and purposes, an individual as owner.

You can almost see the different personalities of the two companies.

Bell is exceedingly corporate, with no dominant shareholder. They are taking the "safe" approach of selling their share in MLSE while the valuation is high.

Rogers though - Rogers is interesting. Although the Rogers family only owns around 9% of Class "B" shares, they do own 97.5% of the Class "A" voting shares (through a Trust). That means Rogers Communication is still very much a family-owned business and Ed Rogers can (mostly) do whatever he wants. So yes - once this purchase goes through Ed Rogers is basically the sole owner of the Leafs and Raptors.

It's a high-risk, high-reward proposition for Rogers. If sports team valuations keep going up he'll make a fortune - or at least another fortune. If they stagnate though he's taking on a LOT of debt, and while the wireless sector is doing huge business the more traditional cable business is looking kind of scary.

I bet some of you might be familiar with CanWest Communications, run by the Asper family. It started very small but soon grew to own Global TV, numerous cable stations, National Post and numerous newspapers, as well as some assets in Australia. But long story short - those acquisitions were made by taking on debt, when the 2008 recession hit CanWest couldn't meet its debt obligations (and no one would loan them more money) so it was forced into bankruptcy.

Ironically - a lot of those tv assets were bought by Corus, which in turn was bought by Rogers.

I could see some parallels between CanWest and Rogers. CanWest made big investments in newspapers right when newspapers started dying. Rogers has big investments in traditional cable TV right when streaming is eating cable's lunch.

 

[Yukon Joe]

They’ll also be trying to get the rights in the next deal, according to Eric Macramella (sports business lawyer) on the radio yesterday.

So I love Macramalla. He's enormously entertaining. He does regular hits (and has for years) first in TSN1260 and now the spin-off Edmonton Sports Talk. He is indeed a lawyer. Here's his firm bio.

Eric Macramalla

Eric Macramalla is a partner at Gowling WLG and a member of the firm's Intellectual Property Group.

gowlingwlg.com

But you can see that he's an Intellectual Property lawyer (and indeed - that's what Gowlings Ottawa office is known for).

So all of that being said - he usually has no inside information. He can make some pretty educated guesses, but that's it. Now from what I can tell TSN (through corporate ownership BCE) probably would like to get the NHL broadcast rights back. But it's also pretty clear they're not going to break the bank in order to do so. If anything they're retrenching a bit on sports - both by selling their share in MLSE, but also by closing all those TSN radio stations.


On a final note - holy crap Macramalla went to the might Manitoba law school! We would have gone there at the same time, although not graduating at the same year. That being said I don't remember him there in the slightest.

 

[Yukon Joe]

But at what cost? How much debt can Rogers take on? They are playing in a very small sandbox (Canada) where the financial upside is limited. If Rogers owned 100% of the company, they could do what they want, but it is publicly traded and they only own <10% of the B-shares.

Given that the company only had $330,000,000 on hand at the end of June, they're going to have to borrow, AGAIN, to buy out BCE. In the future, if they decide to sell off MLSE, who's left to buy it?

Again, I'll bow to the Rogers on this decision, but I don't get it.

So I mentioned Roger's share ownership elsewhere, but didn't cite it.

Dual-class share structure issues in the spotlight in Rogers battle

Rogers family dispute shines light on dual-class share structure issues

www.blg.com

That's an article from 3 years ago when there was a struggle within the Rogers family (which Ed Rogers won) but the ownership structure itself is unchanged - the Rogers family Trust controls the Class "A" voting shares, while class "B" is non-voting.


As for "who is left to buy it" - that depends if you're talking about MLSE, or Rogers itself. Rogers, as a telecom, falls under CRTC and Competition Canada regulations - and indeed it's hard to see who could buy it out. And ownership would need to be Canadian-controlled. MLSE itself though is not subject to those same kind and could be bought by anyone. The Saudis could buy it if they wanted to.

 

[ORRFForever]

So I mentioned Roger's share ownership elsewhere, but didn't cite it.

Dual-class share structure issues in the spotlight in Rogers battle

Rogers family dispute shines light on dual-class share structure issues

www.blg.com

That's an article from 3 years ago when there was a struggle within the Rogers family (which Ed Rogers won) but the ownership structure itself is unchanged - the Rogers family Trust controls the Class "A" voting shares, while class "B" is non-voting.


As for "who is left to buy it" - that depends if you're talking about MLSE, or Rogers itself. Rogers, as a telecom, falls under CRTC and Competition Canada regulations - and indeed it's hard to see who could buy it out. And ownership would need to be Canadian-controlled. MLSE itself though is not subject to those same kind and could be bought by anyone. The Saudis could buy it if they wanted to.

That's fair but I'm not sure how many foreigners would want to own MLSE. Maybe I'm wrong. Maybe there's a line.

Rogers ALWAYS swings for the fences. I just wonder if/when it comes back to haunt them.

 

[ORRFForever]

Telecommunication is an odd little business. You spend BILLIONS to update your technology, as the stock falls, and then live off that update for a decade or 2 - as the stock rises.

Bell is spending their money on change - "Bell had been actively transforming from a legacy telco to a tech services and digital media leader". Rogers is spending their money on sports and entertainment. I'm not sure which will pay the greater dividend but, if I had to bet, it would be Bell.

As for analysts who cover the telecoms, they sure do cut Rogers a LOT of slack. Slack they do not give to Bell or Telus. I'm not sure why.

 

[Melrose Munch]

The Chargers still make more money in LA than they would have in San Diego without having any stadium associated debt they would have if they had to pay for a stadium there. While Forbes isn't the end-all-be-all in terms of team finances but they have the Chargers ahead of Baltimore in income. So yeah being a second team in some markets can be more lucrative than being #1 in others. Would you rather own Ontario 2 or Arizona 1? The NHL admitted an NHL team in Hamilton would be top 5 in value.

I disagree on the Mets/Yankees. The Met were routinely outdrawing the Yankees in the late 80s/early 90s. This was despite the fact that American League counted tickets sold while the National League counted only fans actually in attendence. If the Mets had gone on a Yankees type run in the late 90s/early 00s while the Yankees spent a couple of decades mired in mediocrity the Mets would be the dominant team in town.


Are you serious? The Raiders STILL have a bigger following in LA than the Chargers and Rams do. When they play there its like a home game. Thats why the NFL gave the Chargers first crack to join the Rams

I mean the Chargers would be DOA not the Raiders. Raiders are simply more popular, as you have mentioned.

 

[aqib]

But at what cost? How much debt can Rogers take on? They are playing in a very small sandbox (Canada) where the financial upside is limited. If Rogers owned 100% of the company, they could do what they want, but it is publicly traded and they only own <10% of the B-shares.

Given that the company only had $330,000,000 on hand at the end of June, they're going to have to borrow, AGAIN, to buy out BCE. In the future, if they decide to sell off MLSE, who's left to buy it?

Again, I'll bow to the Rogers on this decision, but I don't get it.

From Tim Leiweke said about the private investment Rogers is taking to do this deal:

As Leiweke said Wednesday: “I’m at a CEO conference today. I’m sitting across from five people that would write that cheque tomorrow. There will be no end of people who’ll invest (in pro sports) … It’s a hell of an investment. There’s nothing like it. And it’s going to continue to grow, and it’s going to continue to prosper.”

 

[Melrose Munch]

Definitely the Argos. The CFL does well in the ratings.

TSN won't let the Argos or the CFL die. One, there is a longtime partnership. Two, the CFL provides a ton of summer content for TSN. A win-win.

The CFL did better in the ratings in the late 2000's and early 2010's. But everyone is down due to streaming.

No one has asked if Bell comes out of this alive, will they bid for an MLB team in Montreal? That would change things for everyone.

 

[ORRFForever]

From Tim Leiweke said about the private investment Rogers is taking to do this deal:

As Leiweke said Wednesday: “I’m at a CEO conference today. I’m sitting across from five people that would write that cheque tomorrow. There will be no end of people who’ll invest (in pro sports) … It’s a hell of an investment. There’s nothing like it. And it’s going to continue to grow, and it’s going to continue to prosper.”

Wow.

For Rogers sake, I hope he's right.

The CFL did better in the ratings in the late 2000's and early 2010's. But everyone is down due to streaming.

No one has asked if Bell comes out of this alive, will they bid for an MLB team in Montreal. That would change things for everyone.

I don't see Bell making a BIG purchase any time soon. The market has been on Bell to pay down their debt for years - all that 5G fiber they put into your lawn wasn't cheap. People are also worried about the dividend being sustainable.

Maybe I'm wrong.

BCE has always been the tortoise. Rogers the hare.

 

[Melrose Munch]

Wow.

For Rogers sake, I hope he's right.


I don't see Bell making a BIG purchase any time soon. The market has been on Bell to pay down their debt for years - all that 5G fiber they put into your lawn wasn't cheap. People are also worried about the dividend being sustainable.

Maybe I'm wrong.

Me either. I think they'll be ready once the Athletics situation is solved in ~ 2years. Right now though, no chance.

 

[Yukon Joe]

That's fair but I'm not sure how many foreigners would want to own MLSE. Maybe I'm wrong. Maybe there's a line.

Well there's the one I suggested - a Saudi sovereign wealth fund. Or any other Gulf arab state - they've invested billions in EPL teams. And as much as I don't like the Leafs as a fan, I have to admit that if you're going to own a hockey team that's the one you want to own in terms of revenue. Raptors are a pretty solid investment as well.

It's kind of at the point where there are no individual Canadians rich enough to own an organization like MLSE. People will point to the Thomson's, but they already own a team and like to stay extremely low-key. Jim Pattison is 95 years old.

Or there's always good-ole pension funds. MLSE was sold by the teacher's pension to Bell/Rogers after all. The CPP investment fund is always looking for things to invest in with over $600 billion dollars behind it.

Rogers ALWAYS swings for the fences. I just wonder if/when it comes back to haunt them.

That's the question, isn't it...

 

[ORRFForever]

That's the question, isn't it...

Yup.

Rogers has TONS of debt - far more than Bell or Telus but, again, for some reason, they get a pass from the market.

And to think this reddit is from 2 years ago before the debt got worse...



If I was a hedge fund looking to short, I'd be licking my chops.

 

[Yukon Joe]

If I was a hedge fund looking to short, I'd be licking my chops.

So look - I am NOT giving investment advise here.

Rogers doesn't seem like a good bet to short just because it's such a large market cap - $29 billion. If you're looking for a "short squeeze" you'd want a more thinly-traded stock.

For a "long short" I mean it's broadly a profitable company, and it doesn't appear to have any major issues covering it's debt payments right now.

If you want to get deep into the weeds it's debt seems broadly spread out over time.

Debt Securities - Rogers Investor Relations

investors.rogers.com

It has about three billion in debt due in 2025 - which it should be able to re-finance.

I think they're just more at risk of more medium term concerns. As I mentioned - the cable tv business looks extremely questionable. They haven't made the same kind of "fiber to the home" investments that Bell/Telus have (by the way I love my Telus fiber internet). instead trying to rely on 5g wireless home internet. And a sudden increase in interest rates would put them at risk of being able to re-finance their debt.