Rogers Communications Inc. announced Tuesday that it is proposing to take its subsidiary Rogers Wireless Communications Inc. private and buy back all the publicly held shares in a move that has telecom analysts shaking their heads.
Rogers asked that trading be halted on the Toronto Stock Exchange (TSE) early Tuesday morning so that it could announce it would acquire all of the outstanding class B restricted voting shares of Rogers Wireless Communications owned by the public in for class B non-voting in Roger Communications, the parent company.
Rogers is offering $27.14 per share, based on the five-day average of the closing prices for both Rogers Communications and Rogers Wireless Communications.
According to a statement by Rogers the transaction is to be carried out by way of an amalgamation of Rogers Wireless Communications and a newly incorporated subsidiary of Rogers Communications.
But it’s a move that has analysts puzzled.
“I have no idea what this is about,” one analyst simply said.
Lawrence Surtees, a senior telecom analyst with IDC Canada in Toronto, speculated that the buyback of shares was to prepare for another move down the road by Rogers.
“The only rational to it, that I can see, is that it is to buy a comfort zone,” Surtees said. “Should foreign ownership rules change then Rogers can sell more shares to AT&T and British Telecom if they need to do so.”
However, Jan Innes, vice-president of communications with Rogers, said: “that’s not it at all.”
Innes said that the company thought the stock was undervalued and that the company had great confidence in the wireless market. Innes pointed out that in 1999 Bell Canada undertook a similar initiative merging Bell Mobility with the parent company in order to simplify its corporate structure.
The new amalgamation will require approval by a majority of the votes cast by Rogers Wireless Communications minority shareholders (excluding shares owned by Rogers Communications and JVII Partnership (a partnership of AT&T Wireless Services Inc. and British Telecommunications). Rogers Communications as part of the transaction will not acquire the shares held by the JVII Partnership. Rogers Communications has requested that Rogers Wireless Communications form a committee of independent directors to review the proposed transaction and obtain a formal valuation of its class B shares.
Completion of the proposed transaction is subject to customary conditions and the applicable regulatory and Rogers Wireless Communications shareholder approvals. Rogers Communications has requested that the necessary Rogers Wireless Communications shareholders’ meeting be held as soon as possible following the completion of the formal valuation of its class B Shares.
Currently, Rogers Communications owns an approximate 52 per cent equity interest in Rogers Wireless Communications, representing approximately 69 per cent of Rogers Wireless Communications class A multiple voting shares and 21 per cent of the Rogers Wireless Communications class B shares. If the transaction is completed Rogers Wireless will become wholly owned by Rogers Communications and JVII Partnership alone. JVII Partnership currently owns approximately 31 per cent of the RWCI class A voting Shares and 40 per cent of the Rogers Wireless Communications class B Shares.
Rogers Wireless Communications subsidiary Rogers Wireless Inc. operates under the co-brand Rogers AT&T Wireless and is a wireless communications service provider, with approximately 2.5 million wireless voice subscribers. Rogers AT&T Wireless provides wireless solutions including Digital PCS, cellular, paging, two-way messaging, and wireless data services to more than three million customers across Canada.
Rogers Communications, based in Toronto can be reached at http://www.rogers.ca.
