Rogers Communications Inc. could sell off almost one-third of a C$25 billion ($18 billion) Canadian sports empire to pay down debt this year, according to analysts at TD Securities.
The Toronto-based telecommunications company has amassed a 75% stake in Maple Leaf Sports and Entertainment, the holding company that owns the Toronto Maple Leafs hockey team, the Toronto Raptors basketball team, and the Toronto FC pro soccer club.
TD expects that Rogers will buy the remaining 25% stake from Kilmer Sports for roughly C$4 billion by the end of the year and turn it into a sports behemoth that would also include Major League Baseball's Toronto Blue Jays and the Sportsnet TV channel.
Rogers could then monetize the investment and pay down debt by selling a 30% stake to private investors for as much as C$7 billion to pay down debt and spin out the unit by the end of 2027, wrote the analysts led by Vince Valentini.
Rogers' push to amass one of North America's largest sports portfolios comes as valuations for franchises have been surging. Lin Bin, the billionaire co-founder of Chinese consumer electronics company Xiaomi Corp., recently purchased a 1% stake in the Miami Dolphins that valued the National Football League team at $12.5 billion. The National Hockey League's Carolina Hurricanes got a $2.7 billion valuation when three private investors bought a minority stake from the team's billionaire owner earlier this month, according to Sports Business Journal.
Toronto, North America's fourth-largest city, is home to a lucrative sports market with dedicated fan bases. TD cautioned, however, that there's historically been a meaningful gap between what private investors are willing to pay for teams and public market valuations.
For example, Madison Square Garden Sports Corp., the owner of the New York Knicks basketball team and the New York Rangers hockey club, trades on the public market at a 22% discount compared to valuations given to it by Forbes, said Valentini.
The gap has narrowed, he said, which could be a good sign for Rogers.