Well I think it could means one or more of a few things.

* Rogers is preparing to look for prospective buyers for either partial or full ownership of the team.

* Rogers has greatly overstated the losses incurred the past two years.

* Rogers really is commited to seeing the plan through and doesn't want to be held back by minority shareholders.

Personally, the first Doug Pappas essay I ever read cured me forever of believing reported losses from anyone but an impartial observer.

Wow, that was a convoluted sentence. I sound like Al Sharpton. Hope it was clear enough =P

It's hard to imagine, especially after this, that Rogers isn't legitimately committed to owning the Jays. Not only do the Jays provide a lot of programming for Sportsnet--hence synergy--but Rogers then went out and bought the FAN to carry the Jays on radio, for more synergy. It's the baseball version of vertical integration.

Wild speculation: Rogers starts building a stadium for the Jays to play in . . . but the stadium can also be used for football, and becomes part of a bid for an NFL team. Understand, I don't care if Toronto ever gets an NFL team or not, but I do think that this is a somewhat-logical extension of Rogers' recent actions.

Along with what Matthew's saying: If you were to publicly make it known that you (Rogers, Inc.) are interested in building a new venue to field the Toronro Blue Jays (and perhaps NFL/CFL football) and have a location in mind and are beginning the architectural planning stages, would that not dramatically increase your bargaining power with those that own the SkyDome? In theory any way.

If you read the article carefully you will see that Interbrew had the right to require Rogers to buy the remaining 20%. Normally these rights are enshrined in the original sale agreement. So back when Rogers agreed to buy 80% of the Jays they also agreed to buy the remaining 20% for $45 mil now, at Interbrews request.

So this deal says nothing about Rogers intentions (they were forced to buy);
It says nothing about the current value of the Jays (the price was set years ago)

You will know more about the value of the Jays when Rogers release their next quarterly financials. They have spent $45 mil for 20% of the Jays. If that is overvalued they will have to take a writedown next quarter. If not, then they can prove, to their auditors satisfaction, that the Jays are worth $225 mil.

Jimmy Key's Christmas Lights - what makes you think that Rogers loses are quite reaL? I think they're complete fiction. Now, there may have been losses, but the losses were no where near the levels mentioned by Rogers. Why would they pay over $200 million for a team that's going to lose $45 million a year? Rogers isn't stupid, and they know that the team isn't doing that badly. I can't imagine that even the most optimistic person would believe that the team will increase in value enough to cover those loses.

Exactly - I wasn't saying that there were no losses, just that they are probably closer to 10 mil than 90. Which isnt chicken feed, but still.

I agree with the majority that this could be a step towards total integration and maybe the beginning of plans to build the Jays a new stadium. We all know that Paul Godfrey wants an NFL team and i'm sure that he holds a lot of influence with Uncle Ted so this could happen. I just hope that it's not a crappy looking stadium if built. I've also heard for years (mainly from Bob Mccown) that the Woodbine area would be the perfect place to build a new stadium.

What are your thoughts?

Anyways I don't see the losses as being as bad as Rogers makes it out to be so I hope this is a step towards strengthening the ballclub.

http://kmarx.com
Rogers reports its ownership of the Blue Jays on the equity method (original price, plus gains and cash contributed, less losses and cash distributed). In its 2002 annual report, its 80% share had a value of $122.8M--that value went up to $136.9M by the end of the third quarter of 2003, but only because Rogers contributed $53.7M, with an offsetting loss of $39.6M. (Under the terms of its deal with Interbrew, only Rogers is liable to cover operating losses.)

What is interesting is that Interbrew exercised its option, but the price was not just $45M, it was $45M plus 9% interest per annum from 15 December 2000--or about $57M to $59M, depending on whether the interest compounds or not. Ouch!

I wasn't saying that there were no losses, just that they are probably closer to 10 mil than 90. Which isnt chicken feed, but still

Well, it is kind of odd then that Rogers have had to pump something like $90 million in cash into Blue Jays Holdco in 2002 and 2003. In Q2 2003 alone, a very good quarter, the Jays lost $14 million.

Now those losses have been offset to some extent by growth in equity - the 80% Rogers stake is now worth $200-250 million whereas they paid $163 million for it, I believe.

All in all, I don't know what reasons Rogers would have to underreport the Jays' income by such a ridiculous extent. But then again, I also suspect that the most vocal doubters got their education in business, accounting, and finance from reading a couple of papers by Doug Pappas.

Yes, it's true that the team's accounting losses may not be the same as its cash losses, and that those cash losses do not necessarily reflect the team's profitability under different circumstances. But pulling a figure like "10 million" out of the air - that's a bit ridiculous.

If you're really interested in the team's finances, the start is always the Rogers financial information, available at the SEDAR website.

Sid - 10 million was not meant to be anything more than a random figure, I wasn't trying to give the impression of any deep knowledge on the subject. I meant it literally, as in "if the losses are actually 40 million, that's closer to 10 than 90."
As I said, I know next to nothing about economics. But as far as baseball goes, it is pretty well-known that it is in the best interests (financially) of the owners around the league to loudly give the impression that many teams are losing gobs of money. The more the public believes the "evil players are losing us millions" line, the closer we are to more restrictive versions of a salary cap. Furthermore, if people believe that the Jays are getting hosed financially, they will be less likely to blame Rogers for giving JP a restrictive budget. So, those are two pretty good reasons right there for Rogers to publicly exaggerate the losses.

http://economics.about.com
What is interesting is that Interbrew exercised its option, but the price was not just $45M, it was $45M plus 9% interest per annum from 15 December 2000--or about $57M to $59M, depending on whether the interest compounds or not. Ouch!

Where did you get the December 15th, 2000 date? I don't see how Interbrew can retroactively charge the Jays interest. The interest charge shouldn't be applied until Intebrew requires the Jays to buy the 20% share.

The article doesn't say if Interbrew forced the Jays to buy the 20%, or if the Jays bought the shares out of their own volition (at some non-$45 mil price). If Interbrew did force the transaction (likely), the the market value of the 20% share must be under $45 mil, so the full 100% would be worth less than $225mil, if you assume each percentage share is of equal value.

Cheers,

Mike

Might it be possible that Rogers likes the direction of the Jays and is buying the remaining 20% while the overall value is still low? Think of how much more that 20% might be worth after another World Championship or two... Buy low, sell high. That's about all my simple mind can grasp, and I'm probably a long way off.

The reason the Blue Jays report large losses is because Blue Jays Holdco must pay Rogers a dividend at a rate of 9.167% per annum according to their agreement. Since the Jays don't have money to pay, they instead transfer income tax loss carryforwards to Rogers to satisfy this agreement so Ted catches a break on his tax bill.

Blue Jays Holdco must pay Rogers a dividend at a rate of 9.167% per annum according to their agreement

Not having looked at the financials, is that a dividend on the common shares, or is it in fact a dividend on the $30 million (?) of preferreds that Rogers bought when they bought the team? If it was the $30 million of perferreds, that doesn't amount to huge losses. If it's on the commons, that's a lot.

http://economics.about.com
From the third quarter results (PDF):

"In conjunction with the arrangement established in 2001, Blue Jays Holdco pays a dividend at a rate of 9.167% per annum on the Class A Preferred Shares that Rogers Telecommunications Ltd. ("RTL") holds of Blue Jays Holdco. During 2003, Blue Jays Holdco satisfied the dividend by transferring income tax loss carryforwards to RTL of approximately $24.0 million (2002 - $27.0 million) with an agreed upon value of $2.4 million (2002 - $2.7 million)."

Cheers,

Mike

It is on the Class A preferred shares that Rogers Telecommunication holds of Blue Jays holdco. In 2003, they transferred $24M in losses for a value of $2.4M.

This is the first I've heard that Forbes was in error in any way. Do you have a link for that? It would certainly change things...

I think we need to pay more attention to how much Rogers is advancing the Blue jays in terms of cash in order to keep the operations running. From the first 3 quarterly reports for 2003, Rogers advanced 1.4M, 30.1M and 22.2M for a total of 53.7M in cash. However, the third quarter statement also states that there will be a net cash inflow in the 4th quarter from the Jays to Rogers due to monies received from MLB for revenue sharing and such. It will be interesting to see how much that is. I don't think that Rogers has any reason to overstate losses since it makes their investment in the Blue Jays look particularly bad to shareholders. Burning cash is not good. I don't know who the Jays would be looking for sympathy from for their losses. Our governments have no money and their is a new CBA. Also, I think their is an incentive for Sportsnet to overpay for Jay TV rights. The last I heard Sportsnet was before the CRTC asking for a cable rate increase because it was losing money due to the fact that TSN charges twice as much. Cable subscribers are an easier target to squeeze money out of. The only thing missing is what kind of synergy between the Jays, Sportsnet and Radio can be created where monies accrue to the broadcasters but not the Jays directly due to better ratings.

JKCL - Just want to clarify. I think it's possible that there are losses. What I meant by my pure fiction line is that I don't believe the Rogers numbers for a second. In hindsight, there were probably better ways to say that.

What are the profit tax laws in Canada?
On pure speculation, I feel that the Blue Jays as a baseball team gets taxed the same amount on profits as the Rogers Communications counterparts (TV or Radio)...
So if you can get benefits in baseball for making losses (increase revenue sharing) why not do it? All you need to do is charge lower broadcast rights to Rogers (part of your own company) thus boosting profits of your TV/Radio companies while the baseball team loses money.
I think this is where we get into arguments as to whether the team is making money or not.

http://www.kmarx.com
Mike Moffatt: the 15 December 2000 figure comes from the 2002 Rogers annual report, at Section 6 ("Investments"), Part A ("Investments Accounted for by the Equity Method"), which starts on Page 47 of the notes to the consolidated financial statements.

Effective December 31, 2000, the Company purchased an 80% interest in the Toronto Blue Jays Baseball Club ("Blue Jays") for cash of $163.9 million. The Company has the option to acquire the 20% minority interest in the Blue Jays at any time, and the minority interest owner has the right to require the Company to purchase its interest at any time after Decmeber 15, 2003, for approximately $45.0 million (U.S. $28.0 million), plus interest at 9% per annum from December 15, 2000. This obligation has been recorded as a liability by the Company. The 20% minority interest owner of the Blue Jays is not required to fund operating losses of the Blue Jays, and, as a result, as required under GAAP, the Company has recorded 100% of the operating losses of the Blue Jays in 2002 and 2001.

You're right that the 9% interest would not appear on the financial statements per se; it only affects the sale price of Interbrew's 20% stake. (The 9.167% interest on the Class A Preferred Shares seems to be a different beast altogether.) I just wanted to note that Rogers will have to pay not just the $45 million, but also the interest on that number.

(Actually, the financial statements imply that the figure is not $45 million Canadian, but $28 million in US dollars, or $36.4 million at today's rates. If that's true, the weak US dollar helped the Blue Jays in the latter half of 2003 and will help Rogers save several million dollars when it has to buy out Interbrew.)

Any chance that Rogers bought out Interbrew so they could sign up a new beer sponsor (eg Molson's)? Given how little promotion Labatt's has provided recently and the general level of annoyance with that, me thinks there may be a new sponsor.