Rogers Communications closed its purchase of BCE’s 37.5% stake in Maple Leaf Sports and Entertainment Wednesday, raising its ownership stake to 75% of the parent company of the NHL’s Toronto Maple Leafs, the NBA’s Toronto Raptors and MLS’ Toronto FC.
The Canadian telecom giant now owns one of the world’s most valuable collections of sports assets.
Including its 100% of MLB’s Toronto Blue Jays, Rogers controls teams in four of the five biggest North American sports leagues, as well as Canada’s biggest sports media brand, Sportsnet. The four teams and Sportsnet are worth more than $12 billion, based on Sportico’s most recent team valuations.
The next challenge for Rogers is how to fully unlock that value for the company and its shareholders.
“We’re looking to monetize some of the assets through a minority sale, through a private equity infusion,” Tony Staffieri, Rogers CEO, said at a Gabelli media conference last month. “We have quite a bit of interest, as you would expect in these assets in the marketplace. And so we’re looking at what’s the best for us in terms of getting liquidity. And you’ll see us putting a marker in terms of what the near-term value is of these assets.”
Rogers’ first sports team investment was in 2000 when it bought 80% of the Blue Jays from Interbrew in a deal that valued the team at $140 million—it bought the other 20% four years later. In 2012, rivals Rogers and BCE teamed up to purchase a combined 75% of MLSE from the Ontario Teachers’ Pension Plan in a deal that valued MLSE at roughly $1.7 billion, including debt.
The communications giant’s original investments in sports teams were made largely to solidify access to rights to games and support the company’s core business, but the value of sports franchises has exploded since then. Sportico most recently valued the Raptors at $4.66 billion, the 10th highest in the NBA, and the Maple Leafs at $3.66 billion, tops in the NHL. In January, Toronto FC was valued at $725 million, ninth overall in MLS, and more than 70x the $10 million expansion fee MLSE paid in 2006.
The climb of NBA valuations is not slowing. During the past three months, the Boston Celtics ($6.1 billion) and Los Angeles Lakers ($10 billion) reached agreements to sell their franchises at 8% and 24% premiums to Sportico’s estimated values from December.
“Most people would agree that sports teams are increasing faster in terms of value than telecom networks will,” Jérome Dubreuil, a Desjardins analyst, said in a phone interview**. “**The return on invested capital for telecom operations is not what it used to be.”
Rogers is paying CA$4.7 billion ($3.45 billion based on current exchange rates) for BCE’s 37.5% stake in MLSE—Sportico was the first to report the agreement reached in September. The acquisition has triggered speculation on what’s next for Rogers’ sports assets.
“A very interesting question is what needs to happen as a catalyst for the market to start giving Rogers more credit for those sports assets, and one of the options that has been floated is an IPO,” Dubreuil said.
One roadmap has Rogers exercising its 2026 option to buy the remaining 25% of MLSE that is owned by Larry Tanenbaum, via his Kilmer Sports holding company. Staffieri says Rogers expects to exercise the option. Last year, Tanenbaum was reelected as chairman of the NBA Board of Governors, and he also represents MLSE with the NHL and MLS. Rogers could then roll up MLSE with the Blue Jays and Sportsnet into a standalone company that might be spun out through an initial offering or sell a stake on the private market. Rogers would almost certainly retain a majority ownership position in any transaction in the near term.
“Our sports assets are unrivaled in Canada, and our sports portfolio is one of the best in the world,” Staffieri said on the company’s first quarter earnings call. “Sports assets continue to appreciate significantly in value, and that’s why investors remain very interested in holding a minority position in these appreciating assets. We continue to meet with external investors who recognize the opportunity with our sports portfolio.”
Sports franchises owned by public companies are typically valued at significant discounts to their private market valuations. Madison Square Garden Sports, which owns the New York Knicks and Rangers, has an enterprise value of $6 billion, while Sportico values the teams at a combined $11.5 billion. Manchester United’s enterprise value is $3.8 billion, 38% less than the $6.1 billion in Sportico’s soccer team valuations. The cash flows of these businesses are not great, and the scarcity factor does not translate to a market with thousands of publicly traded stocks. Fair market value is typically only realized in a transaction.
“We believe that the present stock price of Rogers offers near-zero valuation for its ownership in MLSE,” Aravinda Galappatthige, Canaccord Genuity equity analyst, wrote in a research note last month. “We believe there is a high likelihood of a transaction involving the sale of a minority interest in Rogers’ SportsCo within six to 12 months.”
Rogers joins Kroenke Sports & Entertainment and Fenway Sports Group as the world’s most valuable conglomerates with three or more major sports teams. But unlike KSE and FSG, Rogers’ assets are all concentrated in the same locale, which can offer added synergies in the fourth-largest city in North America.