MONOPOLY CAPITALI$M
Shaw jumps as minister's comments boost odds of Rogers deal
, Bloomberg News
SHAW COMMUNICATIONS INC-B (SJR/B:CT)
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Shaw Communications Inc. rose 7 per cent to the highest level since July after a government minister in Canada clarified the regulatory conditions on its deal with Rogers Communications Inc., improving the odds that the transaction will close.
Shaw shares closed at $36.52, about 10 per cent below the Rogers takeover offer of $40.50. Rogers was up nearly 6 per cent.
Toronto-based Rogers agreed to pay $20 billion (US$14.8 billion) for its rival in March 2021, but the deal has been delayed by Canada’s antitrust regulator, which says it will weaken competition in the wireless sector. The two companies have agreed to sell most of Shaw’s wireless assets to a third Canadian communications firm, Quebecor Inc., to try to solve that problem.
On Tuesday, Industry Minister Francois-Philippe Champagne said he’d approve the divestiture to Quebecor only if the company promises to keep the wireless licenses for at least 10 years and consumer prices improve in Ontario and Western Canada, where Shaw operates. Quebecor Chief Executive Officer Pierre Karl Peladeau said the company will accept those terms.
That’s a sign the Rogers-Shaw deal has a path to the finish line, Desjardins analyst Jerome Dubreuil said. The government “is signaling that the deal would be acceptable if QBR competes in the long term,” Dubreuil said in a note, referring to Quebecor’s stock ticker. “Why would Mr. Champagne set conditions if he were about to say no?”
BUREAU IS ‘FIRM’
The deal still has to pass the antitrust hurdle. Rogers and Shaw are scheduled for mediation with the Competition Bureau this week. If the two sides can’t reach a settlement, the merger is destined for Canada’s Competition Tribunal, a merger court.
“The odds now seem quite low that the Competition Bureau wouldn’t agree to a settlement” with Shaw and Rogers, said Aaron Glick, a merger arbitrage specialist at Cowen & Co. The base case is for settlement, with the deal closing next week, he said.
“We remain firm in our decision to challenge this proposed merger to protect the public interest,” Jayme Albert, a spokesperson for the Competition Bureau, said in an emailed statement. Albert said the bureau was aware of Champagne’s statement but that it would be inappropriate to comment on it.
Rogers-Shaw deal: Feds throw up new
roadblock
Rogers Communications Inc. is facing a fresh hurdle in its $20 billion pursuit of Shaw Communications Inc.
Minister of Innovation, Science and Industry François-Philippe Champagne said Tuesday he officially rejected the transfer of wireless spectrum licenses between the two companies, throwing a wrench in the largest takeover deal in Canadian telecom history
“Earlier this year, I stated that I would—under no circumstances—permit the wholesale transfer of wireless spectrum licences from Shaw to Rogers,” he said in a release.
Rogers representatives declined to comment on Champagne's decision: “Given the ongoing proceedings, we will decline to comment at this time,” a company spokesperson said in an email.
Rogers and Shaw previously argued the acquisition will enhance telecom competition and overall coverage for Canadians through Shaw’s western footprint and Rogers’ beachhead in central Canada.
The two telecom operators also attempted to assuage concerns by announcing plans to divest Shaw’s Freedom Mobile unit to Quebecor Inc. for $2.85 billion in June, pending regulatory approval.
Quebecor's Chief Executive Officer Pierre Karl Péladeau said in a statement to BNN Bloomberg that the company was happy to abide by Ottawa’s new guidelines to secure the deal.
“We intend to accept the conditions stipulated by the Minister and incorporate them into the new version of the Rogers-Shaw/Quebecor-Freedom Mobile transaction, which has already been negotiated,” he said.
“They are in line with our business philosophy, which has proved highly successful in Quebec, where we have taken a significant market share in a very short span of time. We will work to deliver better prices for Canadians in the other provinces and to end the reign of the ‘Big Three’ by promoting competition, the public interest and the digital economy in Canada.”
Champagne said he will only allow the deal to move forward if Quebecor agrees to hold Freedom's wireless spectrum licenses for at least ten years after the deal is consummated.
The deal has faced numerous hurdles, notably the approval of three separate regulatory bodies, and Rogers and Shaw are due to enter mediation talks with the Competition Bureau later this week to address antitrust concerns over the deal.
The deal has already seen a stamp of approval among several analysts who follow the telecom sector. Scotiabank Analyst Maher Yaghi gives the deal a 90 per cent chance to close based on how approvals are shaping up.
“We don’t believe this condition is too onerous for Quebecor to keep. We believe the intent by Quebecor is to grow longer term outside the province of Quebec and since the beginning of the discussion about this deal, management has kept its focus and determination on the long term. We believe that QBR will likely enter the ON/AL/BC markets with 2 brands (Freedom/Fizz) attacking the middle and lower end,” he said in a report to clients Tuesday.
“In addition, with a potential ability for reselling internet they could work to also sell bundled products. We don’t see why QBR could not, long term, achieve a 15 per cent market share in wireless in those provinces given the company’s strong experience in customer service, discounting and marketing insights.”
Canada - home to some of the highest wireless rates in the developed world - has long been in search of a fourth national wireless carrier. Thanks in part to geographic and foreign ownership restrictions of telecom assets, Canadians face some of the highest cell phone bills in the G20.
Rogers has argued that the combination with Shaw – combined with the divestiture of Freedom – will help alleviate some of those price pressures, with the new entity better able to compete with the likes of BCE Inc. – which owns BNN Bloomberg through its Bell Media division – and Telus Corp., which have a network-sharing agreement in Western Canada.
