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ANDREW WILLIS

Thursday, December 07, 2017

If it was only about the money, Rogers Communications Inc. would have sold off high-profile holdings such as baseball's Toronto Blue Jays years ago.

Rogers is flush with approximately $5-billion of assets that financial types describe as "non-core" to the company's cellphone and cable businesses.

Along with the Jays, valued at somewhere in the neighbourhood of $1.6-billion, that list includes a minority stake in Maple Leaf Sports and Entertainment, owner of Toronto's pro basketball, hockey and soccer franchises, that's worth around $1-billion, as well as real estate and a $1.5-billion stake in cable rival Cogeco Inc.

There's a strong argument that the value of these non-core holdings is not reflected in Rogers's share price, which rises and falls on the fortunes of the telecom business.

So, it was no surprise to hear Rogers CFO Tony Staffieri, a highly capable financial type, explain that the company was "looking at ways to better surface the value of the Blue Jays" at a UBS-sponsored investor conference on Tuesday. Rogers brass have been saying this sort of thing for years.

The conversation got a little louder when Joe Natale arrived as CEO eight months ago. Mr. Natale made his reputation at Telus by focusing on the telecom business, and eschewing distracting investments in sports teams. The new CEO plans to ramp up investment in Rogers's wireless network in the next two years, an expansion plan that comes with a $2-billion-plus price tag.

But at Rogers, ownership of the Jays and the other non-core assets isn't just about cash. It's about harder-to-quantify branding strategies, and even harderto-pin-down family dynamics.

Company founder Ted Rogers bought the Jays 17 years ago as part of a plan to put a fanfriendly face on a widely hated cable company, and to provide content for a TV sports network that was consistently finishing second in a two-horse race. Rogers subsequently paid up to gain exclusive Canadian broadcasting rights from the National Hockey League.

Marketing types argue these investments paid off: Rogers burnished its brand and is now the market leader in sports broadcasting. In an interview two weeks ago, Mr. Natale said: "Leveraging our ownership of media and sports is an important part of the future and the strategy here."

Selling the Jays means unscrambling an omelette. A large part of the baseball team's value is based on broadcast revenue. Rogers would never want the 162 Jays games played from April to October appearing on a rival network, so it's going to lock up broadcast rights prior to selling the franchise.

Not doing so would diminish the sale price. And the moment the Jays are sold, Rogers would be forced to cough up a significant sum for local TV rights - the L.A. Dodgers charge their network $200-million (U.S.) annually.

This brings us to the family dynamic at Rogers, which is controlled by the late founder's wife and children. One possible approach to "surfacing the value" of the Jays is to sell the team, but keep it in friendly hands. Deputy chairman Edward Rogers gets put forward as a possible buyer.

There are a host of problems with this scenario. First off, why would Edward Rogers dig into his wallet for an asset his family controlled company already owns? And how would everyone involved, including Major League Baseball, deal with the conflicts that come with a team owner who also runs the team's broadcaster? As recently as two years ago, Rogers also looked at spinning out a minority stake in its sports and media assets. The restructuring didn't go forward, as it created as many problems as it solved.

The other element of Rogers's family history that weighs on the sale of assets is a corporate case of FOMO, or fear of missing out. The Cogeco stake, as with the Jays, is a legacy investment. Ted Rogers established a toehold in Montreal-based Cogeco in hopes of negotiating a takeover with its controlling family, the Audet clan. Rogers still waits for that day to come, but has a handsome profit to show for its patience. How would Mr.

Rogers's heirs feel if they parted with the Cogeco shares, only to see the next generation of the Audet family opt to sell the business?

For the Rogers family, noncore assets such as the Jays and the Cogeco stake seem to resemble a child's treasured piggy bank: Cash that can be accessed if needed, but only by breaking something with sentimental value.

Rogers was built with debt and has weathered financial storms. The company is in better financial shape now than at any point in its history. Mr. Natale has the luxury of time as he decides what to do with non-core assets. There's a solid financial case for selling sports teams and the Cogeco stake.

But marketing strategies and family sentiment will drive Rogers's final decision on these assets.

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