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 Fran?ois-Philippe Champagne, who will be considering the transfer of Freedom Mobile Inc’s spectrum license to Quebecor Inc’s Videotron unit. He has previously expressed support for the transaction if certain conditions are met.
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%.
“This is essentially a done deal, barring any surprises from Minister Champagne,” Aaron Glick, analyst with New York-based investment firm Cowen, told Reuters. “Investors think he waits for INDU’s (Standing Committee on Industry and Technology) hearing before signing off on the spectrum transfer.”
Champagne on Tuesday said he would make a decision in due course.
Canadian Prime Minister Justin Trudeau on Wednesday said the government will make an “appropriate” decision in the best interests of Canada at the right time.
A potential hurdle that could delay the closing is a second review by Canada’s federal lawmakers, to be launched on Wednesday.
The House of Commons industry committee in March said the deal should not proceed, although its recommendations are non-binding.
While not binding, the committee’s report has potential political implication on 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.
Rogers’ planned purchase of Shaw would create Canada’s No. 2 telecoms company and the bureau argued that 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 Inc in order to alleviate competition concern.
Champagne said Quebecor unit Videotron should hold the Freedom Mobile unit for at least 10 years and that 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)
