Rogers' Bid for Maclean Hunter Leaves Room for Negotiation

Strategic Insights -

Rogers Communications Inc. has offered $2.9 billion for 180 million shares of Maclean Hunter Ltd., with a participation right that could provide a significant boost to the deal. The bid includes a "participation right" that will pay the holder part of the proceeds from a proposed sale of Maclean Hunter's cable systems in the United States, provided they fetch more than $1.5 billion. While Rogers' apparent willingness to bargain is buried in 49 pages of legalese, the offer is conditional on several factors, including two-thirds of Maclean Hunter shares being deposited under the offer, regulatory approvals, and the federal government not increasing the tax cost of the offer. The company is paying interest at the prime rate plus 1.5 percentage points a year and has two years to repay $2 billion in bank loans.

Key Takeaways:

  • Rogers' bid for Maclean Hunter includes a participation right that could pay out up to $1.5 billion if the sale of Maclean Hunter's US cable systems exceeds $1.5 billion.
  • The offer is conditional on several factors, including two-thirds of Maclean Hunter shares being deposited under the offer, regulatory approvals, and no change in the federal government's tax policies.
  • Rogers is paying interest at the prime rate plus 1.5 percentage points a year and has two years to repay $2 billion in bank loans.
  • Maclean Hunter shareholders who send in their shares before the offer is increased will get the higher amount.
  • The offer document notes that the bid is open until March 15, or until a later date to be extended.
  • Investment advisers Rothschild Canada Inc., ScotiaMcLeod Inc., and Burns Fry Ltd. stand to earn up to $13 million if the offer is successful.
  • Stockbrokers who solicit Maclean Hunter shares under the offer stand to make $10 million.
  • The participation rights are transferable but cautioned that there is no market for them and no assurance that one will develop.
  • The offer is open to all Maclean Hunter shareholders, not just institutional investors.

Statistics:

  • $2.9 billion: The amount Rogers Communications Inc. offered for 180 million shares of Maclean Hunter Ltd.
  • $1.5 billion: The minimum amount the sale of Maclean Hunter's US cable systems must exceed to trigger the participation right payment.
  • 49 pages: The number of pages in the offer document.
  • $21.62: The price per share of Rogers class B shares on the Toronto Stock Exchange.
  • 4.2 million: The number of Maclean Hunter shares traded on the Toronto Stock Exchange yesterday.
  • 1.5 percentage points: The additional interest rate Rogers is paying on its $2 billion in bank loans.
  • 2 years: The amount of time Rogers has to repay $2 billion in bank loans.
  • $13 million: The maximum amount investment advisers Rothschild Canada Inc., ScotiaMcLeod Inc., and Burns Fry Ltd. stand to earn if the offer is successful.
  • $10 million: The amount stockbrokers who solicit Maclean Hunter shares under the offer stand to make.

Sources:

  • "Rogers bid for Maclean Hunter leaves room for negotiation", Globe and Mail, Date Not Provided
  • Offering circular, Rogers Communications Inc., Date Not Provided