Canada-based Rogers Communications Inc. (RCI) plans to gain complete control over sports television network Score Media Inc. – Canada’s third largest specialty sports channel – by purchasing its full stake for $167 million. The transaction awaits shareholder and other customary approvals.

The proposed acquisition of Score Media Inc. will provide Rogers Communications the right to access television assets of the Score Television Network, that includes Voice to Visual Inc., mixed martial arts promotion The Score Fighting Series, and The Score Television Network. However, the company left out Score’s digital business whose fantasy league and team analysis applications are very popular among sports fans.

Score is an out an out sports channel that provides sports news and information and has a higher appeal among young subscribers. Subsequent to the acquisition, Rogers will get hold of four regional sports channels including the national Sportsnet ONE, Sportsnet World, Sportsnet 590 and Sportsnet 960.

The acquisition of Score Media will enable Rogers Communications to gain an additional 6.6 million television subscribers, contributing $45 million of annual subscription and advertising revenues, coupled with approximately $15 million of annual EBITDA.

Sports channel in general has higher attractiveness to viewers as it allows them to view live games apart from providing information about what is happening in the world of sports. We believe this is a strategic acquisition by the company to improve its sports channel offering and thus attract and retain subscribers and advertisers.

Rogers Communications, which together with Bell Canada, a 100% subsidiary of BCE Inc. (BCE), recently bought a 75% stake in Maple Leaf Sports & Entertainment Ltd., is currently planning to improve its sports content to boost its media segment business. It is expected that if Rogers and Score Media can integrate successfully and offer an attractive package to its viewers it will drive the company’s media segment business.

The current Zacks Consensus Estimate for Rogers Communication Inc. is pegged at 87 cents for the third quarter with a growth rate estimate of (0.97%). For 2012, the Zacks Consensus Estimate stands at $3.08 with a growth rate of (4.05%) but for 2013, the Zacks Consensus Estimate stands at a loss of $3.30 with a growth rate of 7.01%.

Recommendation:

We retain our long-term Neutral recommendation on Rogers Communication. Currently, Rogers has a Zacks #3 Rank, implying a short-term Hold rating.

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