Rogers Sells $600 Million Cogeco Stake to CDPQ to Reduce Debt

Mathieu Dion, Bloomberg News

A Rogers store in the Capilano Mall in North Vancouver, British Columbia, Canada, on Tuesday, Sept. 6, 2022. Rogers Communications Inc. is still waiting to see if it can win regulatory approval for a takeover of a smaller Canadian cable company, 17 months after it was first announced. Photographer: Taehoon Kim/Bloomberg , Bloomberg

(Bloomberg) -- Canadian wireless company Rogers Communications Inc. sold its stake in a rival telecommunications operator to Quebec’s largest pension manager, raising more than $600 million to repay debt in an effort to keep its investment-grade rating.

Rogers is selling its shares in the Cogeco group to Caisse de Depot et Placement du Quebec. The private deal will allow Rogers to cut its leverage ratio to 4.7 times by the end of the year, compared with 4.9 times at the end of September.

Rogers held large stakes in Cogeco Inc. and operating unit Cogeco Communications Inc. for many years in the hope of acquiring it one day, but the Audet family, which controls both entities, rebuffed its overtures — including a hostile bid in 2020.

Instead, Rogers purchased Shaw Communications Inc. for about C$20 billion. After that deal closed, Rogers was downgraded by S&P Global Ratings to BBB-, the lowest rung above junk. It’s similarly rated by Moody’s Investors Service, Fitch and DBRS Morningstar.

“This sale further demonstrates our commitment to strengthen our investment grade balance sheet and aggressively reduce our debt leverage ratio,” Tony Staffieri, Rogers’ chief executive officer, said in a statement.

Caisse de Depot won’t hang on to all of the Cogeco shares it’s buying from Rogers. Cogeco will repurchase some and, in the end, the Quebec pension fund will wind up with a 16.1% stake in Cogeco Communications, a seller of internet, cable television and wireless services within Canada.

“Given the current prices of our stocks, which we believe are undervalued, buying back shares represents an attractive use of our capital to build shareholder value,” Cogeco CEO Philippe Jette said in a statement. S&P cut its outlook on Cogeco Communications to negative.

Shares of Cogeco Inc. and Cogeco Communications have fallen by 18% and 26%, respectively, since the beginning of year in Toronto trading.

(Updates with details about CDPQ, quote from Cogeco CEO Jette and share prices, beginning in the sixth paragraph)