Front Burner - Rogers’ MLSE deal and its evergrowing power

Episode Date: September 23, 2024

Last week, telecomms giant Rogers Communications became a majority owner of Maple Leafs Sports and Entertainment, putting them at the helm of the Toronto Maple Leafs and the Toronto Raptors. The historic deal ensures a huge chunk of Canada’s sports star power is now all in Rogers’ hands.It’s the latest in a series of major acquisitions after a dramatic family struggle left Edward Rogers at the the helm of the company his father founded. Today, Christine Dobby with Bloomberg Canada talks to guest host Catherine Cullen about the Succession-like manouvering that’s led to Rogers becoming an ever powerful force in Canadian business. 

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Catherine Cullen, in for Jamie Poisson. Rogers Communications is virtually everywhere in the country. Cell phones, internet, it owns Sportsnet, local city TV stations. On radio, it has rock and country stations from Halifax to Victoria.

Not to mention stadiums. And as of late last week, it can also add majority owner of Maple Leaf Sports and Entertainment, home of the Raptors, the Leafs, and more to that list. And it already owned the Toronto Blue Jays, meaning a huge chunk of Canada's sports star power is now all in the same hands. The thing is, the power at Rogers has also become more concentrated in one person's hands, the executive chair, Edward Rogers. That's thanks to a dramatic family feud that includes a court case, mean tweets, and a pivotal, game-changing, alleged butt dial. Today, we're going to take a closer look at Rogers' latest big bet on sports,

what it tells us about the telecom company that's increasingly much more than that, and the succession-like backstory behind it all. Christine Dobby is here with me. She's a finance reporter with Bloomberg Canada, who's covered Rogers for a long time. Hey, Christine. Hi, Katherine. So Rogers already owned a chunk of Maple Leaf Sports and Entertainment. How big a deal is it that it's now got majority control? It really is a big deal because this will consolidate the majority ownership of this asset in Rogers' hands.

It's a high-profile asset. You know, for decades, Maple Leaf Sports and Entertainment was owned primarily by the Ontario Teachers' Pension Plan. And it was a really big deal when they sold it to Rogers and Bell. Let's go to our top story now, the sale of Maple Leaf Sports and Entertainment. Bell Canada and Rogers Communications

are usually rivals, competitors. Not today. They have joined forces to obtain 75% of the company together. They'll divvy it up. This is a very lucrative... You know, at that time, the Leafs were the marquee asset, but the Raptors have since won a championship. The value of the franchise has increased significantly.

And this is one of the most valuable sports empires in the world. Whether it's on the ice, the field, the pitch or the diamond, Rodgers $4.7 billion deal to buy Bell's stake in Maple Leaf Sports and Entertainment. So based on the price of the deal, it's now valued at 12.5 billion Canadian dollars. And, you know, it's not just about the tickets and the sponsorships and the merchandise and the food, but it's also about the broadcast rights that come along with owning pretty much all of the teams in the Toronto sports market. That's right. Rogers, in fact, now has control of all of Toronto's major men's sports

teams because the Toronto Argonauts and Toronto FC are also part of this deal. Now, Bell has said that it's selling to reduce debt. But what does this say about Rogers' financial picture that they were able to pull this off? Rogers also has high debt leverage. You know, it spent a lot of money on the deal to take over Shaw last year. But it said that it plans to bring in outside investors to help pay for this deal. And, you know, there's a lot of interest on Bay Street about kind of how that's going to play out. But Rogers has been very outspoken about wanting to invest more in sports assets. And as you mentioned off the top,

they have 100% ownership of the Blue Jays baseball team. So unlike Bell, they really are in a position to consolidate all of the Toronto teams in one entity if they want to down the road at some point. Given all the concentration and potential for concentration, as you said, the consolidation there, are there any regulatory hurdles that could stop this from happening? So the CRTC will look at it. It's not expected that that will be a big hurdle. The Competition

Bureau will also need to approve this deal because it's a large transaction. It's $4.7 billion and deals of a certain size in the country are always reviewed by the Competition Bureau. It's not clear that there will be any major hurdles in terms of a competition perspective. have the right to bid, kind of first right of refusal, to bid for access to the ongoing regional Leafs and Raptors broadcast rights for pretty much the next two decades. So I think there's a sense that that could help assuage any concerns that the Bureau might have that, you know, Rodgers would be the only broadcaster of any of these games. And there are other players out there who could get involved in bidding for those rights as well, such as, you know, Amazon and other streaming giants. And I should just say at this point,

for transparency's sake, that my husband does work for the Competition Bureau. I want to talk about what Rogers is doing, though. They're really leaning into sports here. What does the deal tell us about the kind of company that Rogers aims to be? Yeah, I think it's interesting to go back in time a bit. You know, Rogers bought the Blue Jays in 2000. A couple years before that, they had started Sportsnet, the sports broadcaster that they own. And really over the past decade, they have gone a lot bigger into sports rights. About a decade ago, they spent $5.2 billion buying the national NHL broadcast rights. Today, Rogers has gone from bit player to the dominant figure in Canadian sports broadcasting, outbidding both the CBC and TSN by a large margin. For the first time, a premium sports league in North America has sold their exclusive rights to one entity.

That was a huge deal at the time. You know, it came with sub-licensing, you know, the famous Hockey Night in Canada broadcast to CBC. It's hard to believe, but that deal is actually up in two years. Makes me feel old. I know, right? And the world has changed a lot over the past decade. You're going to see a lot more competition for those rights when they do come up. Rogers already sold some of the Monday night games to Amazon for this season. But from what we've seen from Rodgers, it's likely that they're going to be in the mix for bidding on those broadcast rights again when

they do come up. So I think you've seen over the past decade, at least, Rodgers has been really doubling down on sports. And of course, they're not just leaning in on sports in terms of the big picture. The company's also gone through some big acquisitions in recent years. Can you remind us of some of the most significant ones? So obviously, the big deal, the one that was kind of coming to fruition, you know, maybe decades of ambition for the company was acquiring Shaw Communications. And that took quite a long time to win all the approvals that they needed. There was a court case with the Competition Bureau, but Rogers did succeed in acquiring Shaw. But Ottawa says the deal is going ahead with a promise.

I want to be clear with everyone that I will ensure that a new fourth national player can go toe-to-toe with the big three and actually drive down prices. It's a $20 billion deal, and that closed last year. So that's really, really solidified its cable empire across pretty much the entire country. So they now sell, they have, I think, about 4 million internet customers across the country, close to 3 million cable customers, cable TV customers, and more than, I think they're closing in on 12 million wireless customers. So they're a very big company from that perspective. But over the years, they've also sold off certain assets. They had a print publishing division for a long time,

many for several decades, and that included Maclean's Magazine, Chatelaine Magazine, Today's Parent, Canadian Business. They sold that business to St. Joseph Communications, the owner of Toronto Life, a few years ago in 2019. You might also remember that they launched a streaming service around the same time that Bell launched Crave TV. This streaming service was called Show Me,

and Rogers did end up shutting that down a couple years later. It sort of never gained traction. Rogers also, you know, they own the City TV television network, they own dozens of radio stations across the country. But as we've been talking about, you really have seen it focus more and more on sports in recent years. In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections.

Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people, and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo. 50%. That's because money is confusing.

In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. So much of what's happening at Rogers now seems to center around the vision and the priorities of Edward Rogers. He's the executive chair of Rogers Communication. And his power is a result of some big decisions made by his father, the company founder, Ted Rogers. How did Ted Rogers lay the groundwork for what's happening now? So Ted Rogers, you know, he built up this real communications and media empire by the time he passed away in 2008. And in the later years of his life,

he became really consumed with ensuring that his legacy got passed down. He was obsessed with the family keeping the company. Brell co-authored Ted's autobiography. He says Ted's obsession with the future came from his father. His father was a genius who created the first plug-in radio. He died young. His mother lost the company. And she told Ted over and over as he was growing up,

your job is to get the company back for us. And that's why keeping family control was so important to him. why keeping family control was so important to him. So to do this, he created a trust that would manage the family's controlling stake in the company. So Rogers Communications, the company, is a publicly traded company, but it has two classes of shares. And one of those classes has voting rights and the other does not. The family trust owns almost 100% of the voting shares, which is what really gives them control over the business. And so the family trust has this advisory board that includes Ted's children, as well as Edward Rogers, who is the chair of that board. And as we've seen over the past few years,

that really has given him quite a bit of power. And part of Ted's vision, though, was also grooming Edward to take over. Something I read in some of your reporting that just really stuck with me. He, Edward, sat in the front row of his first CRTC hearing when he was eight years old. Now, he's just one of four siblings, but tell me about the sense that Edward was the heir apparent. Yeah, it's a bit different than giving your kid an iPad to keep them occupied, isn't it? Yeah, so Ted has four children. He has Melinda, Edward, Martha, and Lisa. And only two of them have really taken an active public role in the company over the years. And those have been Edward and Melinda. As you mentioned, Edward, from the early days of

the company was, early days of his life, sorry, was brought into the company. And he spent a lot of his life working at the company, working his way up through the ranks over the years. Melinda, on the other hand, she was always known to be very sharp like her father, but she spent more of her time over the years in Silicon Valley working on a venture capital arm of the business. But it was Edward who was really back at home in Toronto working at Rogers. really back at home in Toronto, working at Rogers. But despite all of that, he never did manage to become CEO of the company. But he has been chair of the company's board for many years. And he's often ended up exercising a lot of influence over whoever is in the CEO's seat over the years through that. The part where it really starts to sound a lot like succession happens in 2021. This is when Edward tries to bring in a new CEO and his family, amongst others, isn't having it.

So tell us about this wild board meeting that took place on September 26, 2021. There had always been a lot of simmering family tension, you know, particularly between Melinda and Edward, but it tended to stay hidden away from public view. And that really changed three years ago, as you said, around this time of year, actually. And that really changed three years ago, as you said, around this time of year, actually. So at this point in time, Edward had tired of the current CEO, who was Joe Natale. He felt he wasn't running the company well, and he wanted to replace him with Tony Staffieri, who was at the time the chief financial officer. So he managed to get a lot of the board directors on his side. But his sisters, Martha and Melinda, they didn't feel good about it.

And they ended up banding together with their mother, Loretta Rogers, and some of the other board directors to try and stop Edward. And as you said, this came really dramatically to a head during a board meeting that was conducted over Zoom in late September of 2021. And it was at this time that Martha Rogers, who has not had a big role with the company over the years or a big public role with the company over the years, but she read out a resolution that went directly against what her brother wanted. And after several days, the board eventually what her brother wanted. And after several days, the board eventually voted to support Joe Natale, fire Tony Staffieri, and also try to rein in some of Edwards' power as chair of the company's board. And they- So just to be clear, just to be clear, so to kick out Edwards' pick and to bring back in the CEO who had just about been shown the door.

That's right. Yes, he was on the verge of signing and finalizing an exit package right as this meeting came to a head. Okay. Now, one other thing that makes this, like that's a dramatic meeting, but there's some other details here that are pretty mind-blowing too. thing that makes this, like that's a dramatic meeting, but there's some other details here that are pretty mind-blowing too. One that really sticks with me, so the now former CEO, Joe Natale, finds out about this sort of like plot to replace him because of what was initially reported as a butt dial, but what you have described as, and I love this, a butt dial in spirit. Can you explain to me what happened with this phone call?

So this remains disputed to this day. But, you know, in court filings, there have been descriptions of Joe Natale overhearing a call that laid out plans to replace him as CEO. to replace him as CEO. And what this led to was him securing support from some of the independent board directors, as well as the Rogers sisters, which, you know, behind the scenes worked to lead up to this dramatic moment where they stood against Edward during that meeting. And as you say, like, this is still a really touchy subject. Yes, this is very much disputed to this day, which I think gives you a sense of how heated and how unusual this whole situation was.

It may sound like a bit of boring corporate governance procedure, but it really did set off one of the biggest corporate battles that Canada has ever seen. The whole situation winds up before the courts. Where are we now? That's right. So after a court battle, Edward is eventually reinstated as chair of the company. Moments before the court ruled, photographs of Edward Rogers appeared on the Reuters wire service, chairman of the board style, just in time to accompany the news that Edward's power play worked. He won. I take no joy in the decision or the events of the past weeks, he said.

The judgment confirms I acted appropriately. A few weeks after that, he does end up putting Tony Staffieri in place as CEO. And after that, the family calls a sort of uneasy truce. This was at the same time that they were trying to win government approvals of the Shaw takeover. And so they basically went quiet on the public front for a while. But it started up again about a year ago when Melinda and Martha filed another lawsuit claiming that they were being cut out of board decisions at Rogers Communications, the company. Now, that case, after some back and forth, was settled in January of this year. And the sisters did agree to step down from the board.

And we don't know the settlements or the details of the settlement, but presumably they were promised a significant amount of money in exchange for that. But the takeaway for people trying to sort of follow the back and forth here is Edward wins. He comes out on top. That's right. And just last month, Edward Rogers was named executive chairman of the company's board. Now, this, again, sounds like a little boring piece of corporate governance trivia. And the board says that this just formalizes a role that he already had. But unlike a typical chair of the board of a company who

would not have any management role in a company, an executive chair, which is the role that Edward has, is more directly involved with the company's strategy and decision making. And this really goes to show how much influence he does have over the company. You saw that this week when the MLSC deal was announced. Edward almost never gives interviews, but he and Tony Staffieri sat down with Ron McLean for this interview about the deal that was later broadcast. And they talked about how, you know, Edward talked about how sports is not new for Rogers. We started in 1998 when we co-founded Sportsnet with CTV and Liberty Media and later bought the rest of it. In 2000, my father bought the Toronto Blue Jays

at a time where there was a fear that the team would move. Being involved with these teams is a public trust, and we view that as a responsibility that we take very seriously and we want to win as much as any of our parents. You can see that this is something that matters to him. He's willing to go out and make a public statement about it. This was, as we've been saying, such a wild, messy case.

Martha was tweeting mean things about Edward having spent a lifetime behind his mom's skirt. I wonder for you, who covered all of this drama, is there a particular detail that stayed with you that sort of clarifies how messy this got?

I think the affidavit that Edward Rogers' mother, Loretta Rogers, filed, you know, indicating that she was concerned that he was putting the future of the company that Ted Rogers had founded at risk. you know, exaggerate hyperbole or not, you know, the fact that his mother had filed such a serious court filing, saying those things about her son, I think really illustrated the extent of the breach in the family. Yeah, it's salacious, but there's like a lot of real humanity at the heart of all of this, too. Absolutely. I want to go back to the reason that we're having this conversation today, this decision to buy out Bell and become a majority owner of MLSC. Bell says part of the reason they're selling is because they want to transform from a telecom company to a tech company. When it comes to Rogers, is it fair to see Rogers as

largely a telecoms company anymore, or has it transformed into something bigger? So, you know, Rogers is always going to make most of its money off of telecom, you know, wireless and internet and television and other related businesses there. But it does see the sports content as feeding well into that business. You know, people want to stream sports games on the internet and watch them on TV and watch them on their phones. games on the internet and watch them on TV and watch them on their phones. And, you know, this is never going to make up the majority of Rodgers' profits, but it does speak to the influence that it has. It's got the only NBA and MLB teams in the country. It's now the gatekeeper to all of the regional sports rights for those teams. They've still got those national hockey rights for another few years. You know, they own the Rogers Center.

So if you're going to see the Taylor Swift tour in November, you're, you know, spending some money with Rogers, they're going to... Even Taylor is not immune from this saga. What don't they own at this point? Thank you so much for this conversation, Christine. Thanks a lot, Catherine. That is all for today. I'm Catherine Cullen in for Jamie Poisson. You can also check out my show, CBC's political podcast, The House. Thank you for listening to FrontBurner.