TORONTO – A transaction begun yesterday will see Microsoft Corp. take ownership of 6% of Rogers Communications shares.
Officially, RCI “announced that it has given a notice of redemption to Microsoft R-Holdings, Inc., a subsidiary of Microsoft Corporation, stating its intention to redeem its C$600 million 5 1/2% Convertible Preferred Securities due August 2009… in accordance with the terms of such securities,” said the press release.
Basically, there were provisions built into Microsoft’s $600 million investment made in Rogers a couple of years ago where if RCI’s share price rose above $45 a share, RCI had the right to convert the debt owed into shares of the company. RCI B shares closed at $47.95 today (Wednesday).
The benefit is twofold. Microsoft goes from being owed $600 million plus a low rate of interest paid by RCI to owning shares worth, on paper, nearly $800 million while Rogers gets to take a large chunk of debt off its books.
“It’s very helpful,” vice-president investor relations Bruce Mann told www.cartt.ca this morning. For many reasons (which have a lot to do with wireless growth and bundled customers) Rogers’ share price has gone from the low 20-dollar mark 12 months ago to more than double their value.
“Under the terms of the Preferred Securities, following today’s receipt of the notice of redemption from Rogers, the Holder has 27 days in which to give notice of its intention to convert the Preferred Securities into an aggregate 17,142,857 Class B Non-Voting shares of Rogers ("Rogers Class B shares"), representing a conversion price of C$35 per Rogers Class B share,” explains the release further.
“Given that conversion price, Rogers expects that the Holder will exercise its conversion right. If the Holder does not give notice of conversion, Rogers will redeem the Preferred Securities on or about November 10, 2005.”
