The Competition Bureau has said “no” to Rogers’ (RCI) $20 billion takeover of Shaw
Communications (SJR), dealing a major blow to the telecommunications deal.
The two companies have now extended the deadline for the merger to July 31 from June 13,
and said they remain committed to the combination. But the Competition Bureau’s attempt to
stop the deal raises the prospect of a legal battle.
Rogers wants to settle the matter out of court and has opened the door to selling assets to
Montreal-based communications firm Quebecor (QBR) to try to resolve the antitrust concerns.
Rogers, Canada’s top wireless and cable provider, agreed to buy Shaw for $40.50 a share last
year in one of the country’s biggest ever takeovers.
However, the wireless business is the key sticking point for regulators: Shaw’s Freedom Mobile
unit is the fourth-largest wireless provider, with a presence in several major markets including
Toronto and Vancouver.
Rogers already has more than 11 million wireless customers -- about 30% of Canada’s
population. The company hired Barclays (BCS) to run an auction for Freedom Mobile in the
belief that selling it would solve the antitrust concerns.
In addition to Quebecor, Rogers has held talks about Freedom Mobile with Canadian internet
provider Xplornet Communications.
However, the Competition Bureau got burned when it allowed BCE (BCE) to acquire Manitoba
Telecom in 2017. BCE divested assets to Xplornet but the buyer failed to become a major
competitor in wireless in western Canada, and implications of the Rogers-Shaw merger are
even bigger.
The agency may want Rogers to divest a more well-established company like Quebecor as it’s a
significant competitor in Quebec and has 1.6 million wireless subscribers, compared with 2.2
million for Shaw.
If the matter isn’t settled, the Competition Bureau will have to argue its case before Canada’s
Competition Tribunal, which is similar to a court and deals with mergers and other matters that
affect competition throughout the country.
Rogers and Shaw said in a statement released over the weekend that they’ll oppose the
Competition Bureau’s attempts to stop the deal while still trying to negotiate a resolution. They
will also continue to seek approval from the federal Ministry of Innovation, Science and
Economic Development.
Rogers shares have fallen 7% in the past month and Shaw’s stock has dropped almost 4%
amid a lack of certainty about the regulatory-approval process.
