Rogers Communications (RCI-B.TO) may temporarily look more expensive if it acquires the remaining 25% of sports teams and arenas owner Maple Leaf Sports & Entertainment, Desjardins said on Thursday.
Analyst Jerome Dubreuil said barring a last-minute deal with Larry Tanenbaum's Kilmer Sports, the Canadian media and telecom company is expected in July to exercise its call option to acquire MLSE in the second half of 2026.
"We believe RCI will ultimately emerge from this process in a better position, but maintain our Hold rating in the meantime," Dubreuil said in a note to clients, maintaining a $59 price target on the stock.
"Sports franchise transactions are typically executed at a premium to private market valuations (PMV), but public markets generally apply a discount to sports assets versus PMV," the analyst said. "We expect this will challenge RCI's value creation in the near term."
Dubreuil expects RCI will pay approximately $4.4 billion for the remaining 25% of MLSE, which owns properties including the Toronto Maple Leafs hockey team, Toronto Raptors basketball team and Scotiabank Arena. That represents a 15%-20% premium to private market valuations, according to Desjardins.
This would temporarily lift Rogers Communications' leverage to about 4.2 times, or about 4.9 times including financing from investment firm Blackstone (BX), and "could make RCI appear more expensive as the added stake would not contribute to higher reported earnings," Dubreuil said.
"Monetization is critical," Dubreuil said. "We expect a $5-8 billion monetization of sports and media assets in 2027."