Mediation fails to resolve objections to Rogers and Shaw merger

Canada’s Commissioner of Competition has had a look at the proposed merger between Rogers Communications and rival Shaw, and his concerns remain unsettled.

Talks with the Canadian regulator have, at least in the first pass, failed to alleviate the concerns it had about the proposed deal. A statement put out by Rogers reads:

The early mediation between Rogers Communications Inc, Shaw Communications Inc, and the Commissioner of Competition on July 4 and July 5, 2022, did not result in a resolution of the Commissioner’s objections to the proposed merger.

The review process will continue as previously disclosed. Rogers and Shaw are not precluded from continuing discussions with the Commissioner at any time.

Rogers and Shaw intend to continue to work constructively with the Commissioner to highlight the many benefits of the merger to all Canadians, including maintaining a strong and sustainable fourth wireless carrier across Canada through the proposed divestiture of Freedom Wireless to Quebecor Inc.

Rogers announced plans to buy rival Shaw for C$26 billion in March last year, in a deal that both companies pitched as a driver of 5G rollout in Canada, and which they had  aimed to complete it in the first half of 2022. Rogers has agreed to pay C$40.50 per share in cash for Shaw, which amounts to around C$20 billion and equates to a premium of around 70% on the target’s recent share price. The deal will also include around C$6 billion of Shaw debt, raising the value of the transaction to C$26 billion, or close to US$21 billion.

Both companies are big, legacy players in the Canadian TV and Internet markets, therefore it was perhaps inevitable that there would be some poking around by the regulatory bodies. Perhaps anticipating this, the firms said in a joint statement at the time of the purchase announcement: “Rogers and Shaw intend to work cooperatively and constructively with the Competition Bureau, the Ministry of Innovation, Science and Economic Development and the Canadian Radio-television and Telecommunications Commission. Subject to receipt of all required approvals, closing of the Transaction is expected to occur in the first half of 2022.”

However in May this year, Canada’s Commissioner of Competition indicated he intends to block the deal, at which point he two firms extended their completion deadline to the end of July to give them time to plead their case with regulators. A key sticking point seems to be Shaw’s Freedom Mobile business.

Shaw it is Canada’s fourth mobile player, but is well behind Rogers, Telus and incumbent Bell, which is apparently part of the Competition Bureau’s concern. At the time the firms put out another joint statement saying “The companies have offered to address concerns regarding the possible impact of the Transaction on Canada’s competitive wireless market by proposing the full divesture of Shaw’s wireless business, Freedom Mobile. Rogers and Shaw are engaged in a process to sell Freedom Mobile, with a view to addressing concerns raised by the Commissioner of Competition and ISED.”

This latest statement doesn’t seem to say much other than noting has as yet been resolved – but it sounds like dialogue is ongoing which is good news from the perspective of those looking to push the deal through. We’ll have to wait until there’s something more solid from the regulator to know either way.

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