The Caisse de dépôt et placement du Québec (CDPQ) is buying the stake held by Rogers in Cogeco, a private transaction valued at $829 million.
Rogers Communications held a 38% subordinate equity interest in Cogeco and 24% in Cogeco Communications.
The deal comes three years after Rogers unsuccessfully attempted to buy Cogeco in a bid in tandem with a US telecommunications company.
The Caisse has agreed with Rogers to repurchase its subordinate shares of Cogeco and Cogeco Communications at a 10% discount from the market price at the close of the Toronto Stock Exchange on Monday.
Rogers therefore sells its 6 million shares of Cogeco at a unit price of $46.91 while they are worth $52.12 on the stock market and also sells its 10.7 million shares of Cogeco Communications at a price of 51.40 $ while they have a value of $57.11 on the stock market.
By participating in the operation, the Caisse de dépôt says it wants to support Cogeco’s growth projects as connectivity needs continue to grow.
“The repurchase of this major block of shares is key for the company and the pursuit of its development plan in the North American market,” said Kim Thomassin, first vice-president and head, Quebec, of CDPQ in a press release. .
Cogeco Communications stock is down about 25% this year. That of Cogeco, for its part, shows a decline of approximately 20% so far in 2023. This pressure pushes the dividend yield at Cogeco to 6.5% and that at Cogeco Communications to 6%.
By virtue of the multiple voting shares it holds, Cogeco controls its subsidiary Cogeco Communications, an entity that provides internet, video and telephone services in Canada and 13 American states.
In addition to an economic participation in its subsidiary Cogeco Communications, Cogeco operates 21 radio stations.
The chairman of the board of directors of Cogeco, Louis Audet, controls the destiny of the company since the family holding company of which he is president controls 69% of the votes at Cogeco.
For Rogers, the transaction should help strengthen its balance sheet and reduce its debt ratio.
Repurchase of shares by Cogeco
Furthermore, in a parallel transaction, Cogeco repurchases for cancellation purposes the 6 million shares of Cogeco that the Caisse has just purchased from Rogers. In addition, Cogeco Communications repurchases for cancellation purposes 2.3 million of its shares which belonged to Cogeco. Finally, Cogeco also sold 1.4 million shares of Cogeco Communications to the Caisse.
Judging that the current stock price undervalues the shares of Cogeco and its subsidiary, the CEO of Cogeco and Cogeco Communications, Philippe Jetté, maintains that the share buyback represents an “interesting” use of the company’s capital to increase shareholder value.
Ultimately, the Caisse will hold 6.8 million subordinate shares of Cogeco Communications, the equivalent of a 16% interest in all outstanding shares of Cogeco Communications.