Rogers-Shaw on cusp of final nod for protracted C$20 billion deal, shares rise
1:45 pm Wednesday, January 25th, 2023
By Maiya Keidan and Divya Rajagopal
TORONTO (Reuters) -Rogers Communications Inc’s long battle to buy smaller rival Shaw Communications Inc overcame a major hurdle after the Canada Competition Bureau dropped plans to kill the deal following two defeats in courts in less than a month.
The bureau on Tuesday accepted the verdict of the Federal Court of Appeal (FCA) and said it would not pursue an appeal. Its decision is widely seen as paving the way for the C$20 billion ($14.98 billion) transaction to clear ahead of its Jan. 31 deadline.
It now awaits final clearance from Industry Minister François-Philippe Champagne, who will be considering the transfer of Freedom Mobile Inc’s spectrum licenses to Quebecor Inc’s Videotron unit. He has previously expressed support for the transaction if certain conditions are met.
“This is essentially a done deal, barring any surprises from Minister Champagne,” Aaron Glick, analyst with New York-based investment firm Cowen, said. “Investors think he waits for INDU’s (Standing Committee on Industry and Technology) hearing before signing off on the spectrum transfer.”
On Wednesday, Canadian Prime Minister Justin Trudeau weighed in, saying the government will make an “appropriate” decision in the best interests of Canada at the right time.
Members of Parliament also grilled the competition bureau and Department of Industry on the transaction on Wednesday, as part of a second review by Canada’s federal lawmaker.
Shares in both Rogers and Shaw gave up some early gains after rising in opening trades. Shaw shares rose as much as 1.4% to a record high of C$40.06, with the discount to Rogers’ offer narrowing to 1.1%, underscoring the market’s optimism for the deal’s success. Rogers shares gained as much as 0.9%.
Brian Masse, a New Democratic Party parliamentarian asked Anthony Durocher, deputy commissioner, Competition Promotion Branch at the competition bureau, whether the laws of the antitrust agency need to be modernized.
Durocher told the committee the competition bureau has been very vocal on the need to modernize Canada’s Competition Act.
The committee in March said the deal should not proceed, although its recommendations are non-binding.
However, the committee’s report has potential political implications for Champagne’s decision, Bank of Nova Scotia analysts said in a note late Tuesday.
“Given the backing of the Competition Tribunal and the fast dismissal of the Federal Court of Appeal on the case, we don’t see why the Minister would not follow on his prior early indication of approving the transfer pending some remedies from the merging parties,” the note said.
Champagne on Tuesday said he would make a decision in due course.
Rogers’ planned purchase of Shaw would create Canada’s No. 2 telecoms company and the bureau argued it would lessen competition in a country where wireless bills are already among the highest in the world.
But the Competition Tribunal rejected the case in late December, prompting the bureau to file an appeal.
Rogers-Shaw have agreed to sell Freedom Mobile, a wireless business owned by Shaw, to Quebecor in order to alleviate competition concerns.
Champagne said Quebecor unit Videotron should hold the Freedom Mobile unit for at least 10 years and prices for wireless services in Ontario and Western Canada should be comparable to what Videotron is offering in Quebec, which currently are on average 20% lower than in the rest of Canada.
($1 = 1.3352 Canadian dollars)
(Reporting by Maiya Keidan and Divya Rajagopal; Writing by Denny Thomas; Editing by Jason Neely, Mark Porter and Chris Reese)