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Could Rogers Be Getting Set To Sell The Blue Jays? Like, Maybe For Real This Time?

Usually when a city starts to hear rumblings that a beloved sports franchise of theirs is up for sale trepidation sets in awfully quickly. Not so when it comes to the Toronto Blue Jays, who are now over a decade-and-a-half deep into being owned by Canadian telecommunications giant Rogers, and one of just two MLB clubs remaining that are coporately owned.

From getting a chance to properly auction off their broadcast rights, to not having every financial decision floated through the prism of an army of stockholders, there is a lot to like about the idea of the Jays no longer being controlled by a publicly traded company — and no chance that the club might move from what’s one of the great markets in the game. Even if the Jays were to be purchased by a jointly-owned venture like MLSE — of which Rogers and Bell own 37.5% each, with the remaining 25% belonging to Larry Tanenbaum’s Kilmer Sports Inc. — that would seem to be quite preferable to the current setup. As Dave “the Hammer” Shoalts wrote for the Globe and Mail in 2015, an accounting rule known as the “equity accounting method” means that ” the profit or loss of any majority-owned asset such as the Blue Jays has to be included in Rogers’ earnings before interest, taxes, depreciation and amortization (EBITDA), which can directly affect the company’s share price,” but that “publicly traded companies can combine the profits or losses of any subsidiary companies in which they own less than a 51-per-cent interest and keep those results separate from their annual EBITDA.”

In plain terms, to crib the examples Shoalts used then, MLSE can go and spend big on Mike Babcock, Lou Lamoriello, and a state-of-the-art practice facility for the Raptors without those big outlays of cash affecting Rogers’ or BCE’s bottom in in the same way that it would if the Jays were to ramp up their budget to sign a top tier free agent. “According to a source familiar with the finances of both Rogers and BCE,” Shoalts wrote, “if Rogers were to sign [David] Price for $30-million a season, then that $30-million would have to come from the budgets of other Rogers Media companies.”

Why do I bring this all up? Because new Rogers CEO Joe Natale has just passed the six month mark on the job, and apparently there are rumblings that the former Telus honcho — who from the beginning was thought to maybe not be enamored with his new company’s diverse array of divisions — might be getting set to move the company’s focus back to its core assets. Or so says a report this week from Andrew Willis of the Globe’s Report on Business ($).

After Rogers management sat down with analysts in New York last month, Citibank published a note that said Rogers brass is earmarking cash from asset sales for paying down debt, buying back shares and boosting dividends.

Coming out of the same meeting, UBS pumped out a report detailing how Rogers’s management planned to deal with the taxes that would come with selling the Jays and Cogeco shares.

We’re later told that “speculation on Rogers’s plans for the Jays and the Cogeco stake has swirled for years. But the arrival of a new CEO with a reputation for a laser focus on wireless and cable operations and the steady drumbeat for asset sales from the analysts has got the hedge-fund crowd sniffing around.”

Most crucially, we’re told this:

The Rogers CEO is consistently demonstrating a deep knowledge of the case for selling some of the telecom company’s legacy holdings. If the Jays, MLSE and the Cogeco position are truly non-core assets, and it’s clear they are, look for Mr. Natale to move sooner rather than later by cashing in on one or more of these businesses.

This is all just speculation, then. But it’s… uh… pretty strong speculation, isn’t it? Especially that last bit. And though elsewhere in the piece, Natale is quoted as saying that the company is “happy with the asset mix we have right now,” the implication seems pretty clearly to be that that’s really the only thing he could say on the matter, whether it’s true or not.

I’m sure there are readers out there who are far better versed in the language of the business pages than I am, who might be able to parse this stuff a whole lot better than I can, and could maybe point out stuff that I’m missing. But to a layman like myself, this certainly feels — more than at any point that I can remember (which isn’t exactly saying much) — like a thing that could actually be inching toward actually happening. I guess we’ll see! And if it is…uh… yeah! Let’s do this!

(For more to think on the subject, consider Jon Shell’s piece from earlier this summer at BP Toronto, in which he makes the case that it’s time for Rogers to sell. Shit, maybe it really is!).

 

Crotch grab in the direction of the great @_ClintB for the heads up!

  • DAKINS

    A sale to MLSE would mean the Jays would hold their position as one of the teams with the richest ownership in baseball. However, the fact that MLSE was included in the quote about “non-core” assets, Rogers might be getting out of sports ownership altogether.

    That sounds great on the surface, but then what happens if the new owners end up being middle of the road in terms of being able to keep up with the cost of putting an elite team on the field? Not to mention taking on the complete renovation of the Dome, a new ST complex, etc.?

    Then there’s the question of what happens to the rest of MLSE?

    Perhaps someone will step into Rogers’ role in MLSE and all will be well.

    This is all very interesting, but Canadian sports are a strange business. This could all go sideways fast.

    • ErnieWhitt

      I mean – it is a possibility that the new owners in this theoretical situation might be just as hesitant or constrained to spend in ways that would benefit the team, but the same outside forces would still be pushing them to act like the big market team they are. Primarily, the new owners could auction off broadcast rights bringing in a huge influx of cash. If this allows the Arizona Diamondbacks to outbid the Dodgers for Grienke, then I have to like the chances of the team with the largest TV market to do ok. Secondarily, the Jays continue to have extremely strong attendance despite the team’s disappointing performance. Factor in the CAD rebound this year and I would say its unlikely that a new owner would buy the team and then retreat into a shell to save coin.

      • DAKINS

        Don’t get me wrong, I’m not saying any new ownership would mean lower payroll for the rest of time, I’m just saying there are a lot of expenses that this theoretical new ownership would have to take on first day in order to maintain an upward trajectory in terms of on-field and off-field performance of both the team and it’s facilities.

        Most new ownership wants to make cuts right off the bat, not open up the wallets further after spending a massive amount of money just to buy the team.

  • misanthropic sports fan

    Idealistically it seems like a real possibility! It makes too much sense. Especially since MLSE is co-owned by Rogers, it’d be like they were selling it back to themselves but at a lesser stake/amount of financial responsibility.

    Giving the reigns to MLSE would be really nice because they’re Toronto-first. Rogers is going to lose the CANADA’S TEAM™ angle as soon as Montreal gets their expansion team, so why not pass the torch to a group that actively contributes in strengthening the identity/confidence of Toronto through sports before they lose marketshare?

    That also theoretically means that naming rights to the Rogers Centre would be up for grabs! I’d be hoping for a name like TD SkyDome or Blue Jays Field (even if it’s more like Blue Jays Concrete/Dirt And Carpet).

    • DAKINS

      It would be a waste not to continue to capitalize on the Canada’s Team angle. The dreams of a team in Montreal are still only that. MLSE is also still marketing the Raptors as a national team as well, with the We The North campaign.

      As for the name of the Dome, it is highly unlikely that SkyDome would again be anywhere in the name, as everyone would just drop the sponsor name and call it SkyDome, which is the reason Rogers called it Rogers Centre in the first place.

  • The Humungus

    So, my understanding from reading Rogers financial statements has been that, for at least the last 2+ years, the Rogers Media division has offset it’s TV losses with the gains from the Blue Jays. These losses aren’t just the NHL deal, but also related to their start-up and operating costs for networks like Vice that they have added to their portfolio over the last few years.

    As currently constituted, spinning off the Jays (and the Rogers Centre) would limit the ability to mitigate those losses. Unless the idea is to divest themselves of the media division altogether, which would be pretty insane given all the sunk costs in there, and would only create, at best, a temporary gain for the Shareholders (much like the concept of the Ontario government selling off Hydro One).

    I could understand the desire to sell the Jays if they think that the value generated by the team and venue won’t exceed the costs of stadium renovations over the next few years. Since it’s pretty clear that no one would be getting municipal or provincial funds for building a new stadium, trying to sell the team before retrofitting the stadium would seriously hurt the valuation (capital asset improvement/replacement costs, when relatively definable, are subtracted from enterprise value during any business valuation).

    From the article, it appears as though they’d hold on to their stake in MLSE, because as an investment rather than wholly owned property, it essentially delivers only positives for the bottom line (as Shoalts pointed out in the 2015 piece). Selling the team and venue to MLSE would be a good idea from that perspective, as they’d no longer be on the hook for operating costs of the franchise, and would only serve to enjoy the benefits of profit, provided the team is in the black. Unfortunately, that would also mean having to pay a market rate for the broadcast rights, or splitting them with TSN. If you disregard the Dodgers ridiculous deal, and take “local” market size (using just the GTA), Jays TV rights are probably worth in the neighbourhood of $90M USD per year (https://www.fangraphs.com/blogs/estimated-tv-revenues-for-all-30-mlb-teams/ – source for that quick estimate), which is a cost that I’d guess exceeds the current profits of the team/stadium combined. From that end, unless they’re totally blowing off the whole Media division, it’s not worth it to sell the team on a year-to-year revenue basis, and again, would just create a one-time windfall for Rogers.

    • jmyyz

      I know we say “1 time windfall” but isn’t the extreme size of said windfall something to consider. Realizing their ROI after the crazy low purchase price of the team and the stadium feels like it would be helpful to Rogers. Especially if selling to MLSE where they could continue to share in about 1/3 of future gains.

      • The Humungus

        Right. But a one-time windfall has a different effect on Rogers than it would for the shareholders.

        I mean, Rogers dropped a half billion dollars off their long term debt in 2016, and another quarter billion off short term debt. Regardless of what they sell the team/stadium holdings for, if debt reduction is part of his strategy (and it should be, they’re carrying over $15B of it), it’s debatable that even with the proceeds from selling the team, stadium, or the entire media division, that they will make a significant enough impact on that debt to raise the dividend anymore more than maybe 5% (which would amount to about an extra 13 cents per share annually)

    • MikeB

      Not that it’s a huge dollar impact, but they also just recently mothballed RogersTV. I’m not sure how that channel differs in categorization from, say, other Rogers-owned stations (like Omni, etc), but I guess it’s something.

      And I’ll miss it a bit – I kind of enjoy hyper-local TV. Reminds me of Weird Al Yankovic’s movie UHF haha.

    • Barry

      Actually, now that I’ve spent ten seconds thinking about it, it is.

      I worry about what would happen if selling the Jays weren’t an easy matter. I mean, we would like to think someone would want to milk this cash cow, but what if it doesn’t fit anyone’s plans?

      I mean, imagine if we had a team run be a disinterested owner who only owned the team because they were having trouble unloading it? That would be interbrutal.

    • Nice Guy Eddie

      Actually, Ted Rogers kept baseball in Toronto when there was talk that the Blue Jays would be contracted or moved. So Ted deserves a statue in my book.

      • Barry

        Then Paul Godfrey and Don McDougall deserve statues too. One helped on the municipal level and the other on the business level to bring MLB to Toronto. Realistically, the Jays were not going to be contracted (NO team was contracted) and were unlikely to be moved (they were far from the leading candidate for relocation, and only one team has relocated in that time; MLB franchises are generally the most difficult to move). So, Rogers “saved” the team from something that probably was never going to happen, while Godfrey and McDougall can be credited with the existence of the franchise in the first place. So … more statues? Our “monument park” can be a couple of corporate executives and a pinhead former politician?

        The Ted Rogers statue is there for Rogers, and for his family’s vanity. It’s not something the fans or the public want or need, which is really the point of erecting statues. And with no statues of anyone the public actually cares about, that Ted Rogers statue sticks out like an outrageous cable bill.