(Bloomberg) -- Rogers Communications Inc., Canada’s largest wireless company, says it’s close to a C$7 billion ($5.1 billion) structured equity investment to finance parts of its network and reduce its debt load.
The Toronto-based company said Thursday it has a “non-binding term sheet with a leading global financial investor” that it didn’t name. Rogers will keep operational control of its networks and ownership of its cell towers, executives said during a conference call.
The shares fell as much as 3.8% in morning trading in Toronto, the biggest intraday drop since July 2. The company also released third quarter earnings that beat analysts’ forecasts.
The disclosure about the financing sheds light on how the company plans to keep its leverage under control while also buying a 37.5% stake in Maple Leaf Sports & Entertainment Ltd. from BCE Inc., its biggest competitor.
That C$4.7 billion deal, announced last month, would give Rogers control of some of Canada’s most valuable sports franchises, including the Toronto Maple Leafs hockey team. The company said at the time it plans to complete the transaction without increasing its leverage, but it gave little detail on financing.
Rogers expects the structured equity deal to reduce its leverage ratio to 3.7 times by the end of the year.
“This is well ahead of our 4.2 times target we previously communicated, and it will accelerate our Shaw deleveraging plans by a full 12 months,” Chief Executive Officer Tony Staffieri told investors on the conference call. He said it was an “innovative approach to maintaining an investment-grade balance sheet, while investing in growth.”
Analysts responded positively to the announcement, but are waiting on further details.
“High leverage has been a significant issue that investors have voiced as a reason not to invest in the stock,” wrote Maher Yaghi of Scotiabank in a client note. “Seeing a major move by the company to tackle this issue is a positive in our view.”
“The material step-down in leverage represents a meaningful derisking of the balance sheet, putting Rogers’ leverage on par with large-cap peers at the end of 2024,” wrote Drew McReynolds, analyst with RBC Capital Markets.
The company earned C$1.42 a share on an adjusted basis in the third quarter, better than the C$1.36 expected by analysts in a Bloomberg survey. Revenue came in short of expectations at C$5.13 billion, though media revenue growth was a bright spot. That unit brought in C$653 million, exceeding analysts’ forecasts, because of higher sports revenue.
Rogers’ wireless unit, its largest business, added 101,000 postpaid mobile subscribers during the three months ended Sept. 30.
Rogers, BCE and Telus Corp. were urged this month by Canada’s telecom regulator to report “concrete steps” in reducing roaming fees by Nov. 4. The Canadian Radio-Television and Telecommunications Commission said Canadians “lack choice” when roaming and that the rates telecom companies charge are too high.
(Updates with share price move in the third paragraph.)
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