The Competition Bureau notified Rogers Communications Inc. on Friday, it plans to oppose the takeover by Toronto-based telecommunications giant of Calgary-based Shaw Communications Inc. CARLOS OSORIO / Reuters
Rogers RCI-BT seeks to save its $ 26 billion takeover of Shaw by raising a suitable buyer for Shaw wireless operator SJR-BT Freedom Mobile after the Canadian Competition Authority promised to take steps to block the merger of the two -large cable networks in the country.
The Competition Bureau notified Rogers Communications Inc. on Friday, it plans to oppose a takeover by Toronto-based telecommunications giant Calgary-based Shaw Communications Inc., prompting the two companies to postpone the June 13-July 31 deadline for closing the deal.
The companies said in a statement early Saturday morning that they remain committed to the deal and plan to oppose the candidacy of Matthew Boswell, the competition commissioner.
According to analysts, the bureau will announce the reasons for blocking the deal as early as Monday. They said the regulator’s main problem is to ensure that Rodgers sells Freedom Mobile’s Shaw division to a new owner who will make a long-term commitment to compete in mobile phone markets. Freedom is the fourth largest wireless operator in the country with approximately two million customers in Ontario, Alberta and British Columbia
Rodgers, Shaw says Competition Bureau commissioner plans to oppose $ 26 billion merger
Rodgers failed to listen to Ottawa, and now the Shaw deal is in jeopardy
The priority for Rodgers and Shaw is to find a Freedom buyer to satisfy the Bureau of Competition and the Ministry of Innovation, Science and Economic Development (ISED), instead of participating in hearings that could take months, according to sources familiar with the process. . The Globe and Mail did not identify the sources because they were not authorized to speak publicly on the matter.
Shaw’s share price is expected to fall when trading begins on Monday, according to analysts at investment bank Cowen Inc., as investors reacted to Friday’s news that the deal was delayed and the deal was more likely to fall apart. CIBC analysts said in a report: “We believe that a deal that harms Rodgers’ wireless franchise could lead them to reconsider the deal.
Shaw shares closed at $ 37.56 on the Toronto Stock Exchange on Friday, a 7% discount on Rodgers’ takeover bid of $ 40.50 per share. If the takeover fails, Rodgers owes Shaw a $ 1.2 billion holiday fee.
Rodgers has been trying to sell Freedom for several months and has introduced potential buyers to regulators, including Stonepeak Infrastructure Partners, a New York-based private equity fund owned by rural internet provider Xplornet Communications Inc.
Rodgers also began talks with Freedom last week with Montreal-based Quebecor Inc., The Globe and Mail reported on Friday. Quebecor is a major player in the Quebec mobile phone market, and CEO Pierre Carl Pelado has openly discussed interest in acquiring Freedom as part of a national expansion.
Over the weekend, analysts outlined scenarios for Rodgers to tackle regulatory barriers. The telecommunications company must be approved by the Competition Bureau and ISED, Cowen said in a report.
“We see two ways to complete the deal: (1) Rodgers goes between his legs to Quebec and works to deprive him of his liberty; (2) ISED approves the sale of Stonepeak and Rodgers closes the deal with Shaw while fighting the Competition Bureau before the tribunal, “said Cowen.
Toronto-based telecommunications talks with Quebecor came after Videotron Ltd. the Montreal-based company sued Rodgers for $ 850 million last October, alleging breach of contract with the companies’ Quebec and Ottawa shared wireless networks.
“Given the history between the companies, we do not believe that Rodgers would have encroached if it had not been authorized by the Bureau,” said analysts at CIBC. “Under the scenario that Rodgers has to sell to Quebec, we expect Quebec to be able to negotiate an attractive deal for the assets, which we estimate at $ 3.74 billion.
Mr Pelado said he had the upper hand in the discussions because he had other options to fulfill his ambitions to turn Quebec into a national wireless operator, according to a source familiar with the discussions. The Globe did not identify the source because the person was not authorized to speak publicly on the matter.
For example, Videotron, which spent $ 830 million on key 5G wireless broadcasts in the last federal auction, could expand beyond its home province of Quebec by leasing access to a wireless network as a mobile virtual network operator or MVNO in the new regime introduced by Canadian Telecom. regulator.
Quebec’s top officials are concerned that they will not be used as a stalking horse to increase the value of Freedom, and say certain terms of the confidentiality agreement Rodgers asked them to sign are unacceptable, the source said.
Globalive Capital chairman and Freedom Mobile founder Anthony Lacavera, who offered $ 3.75 billion to buy back the wireless carrier, expressed similar concerns about the confidentiality agreement he outlined in a letter to Ottawa in March. According to Mr Lacavera’s letter, the agreement contains “extraordinary restrictions” on funding and communications with regulators around the deal.
Freedom Mobile’s growth has stalled in the last quarter. The show added 8,632 new wireless wireless subscribers in the quarter, well below the 75,069 it added in the same quarter last year. (Subscribers with a payment subscription are those who are charged at the end of the month for the services they have used, compared to prepaid customers who pay in advance for wireless services.)
A spokesman for the Competition Bureau said the agency had not yet submitted its application and “will release more information about our investigation in due course”.
“Because the law requires us to do our work in private, we are unable to comment further,” Amy Butcher said in an email.
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