Rogers' $16 billion bid for Shaw shakes up Canadian telecoms industry
Rogers Communications said it was buying smaller rival Shaw Communications for about $16.02 billion in a deal that would create Canada’s second-largest cellular and cable operator but might attract stiff regulatory scrutiny.
“This transaction will create long-term value for both companies’ shareholders and just as important, this transaction will ensure Canada’s cable and wireless industry can support the significant capital requirements needed for 5G networks and the essential connectivity that rural Canadians desperately need,” Rogers CFO Tony Staffieri said.
By acquiring fourth-ranked Shaw, Rogers would overtake Telus Corp and take on market leader BCE Inc in the highly competitive Canadian telecommunications industry.
“It’s really too early to speculate on the regulatory outcome overall,” Rogers Chief Executive Officer Joseph Natale said on a conference call. “But we feel confident this transaction will be approved.”
The merged entity, made up of the two family-founded Canadian companies, will use its assets, capabilities and newfound ability to scale to deliver “unprecedented wireline and wireless broadband and network investments, innovation and growth in new telecommunications services.”
In addition, Shaw stated that the combined company will invest $2.5 billion in 5G networks over the next five years across Western Canada and will commit to establishing a new $1 billion Rogers Rural and Indigenous Connectivity Fund dedicated to connecting rural, remote and Indigenous communities across Western Canada.
Canadian Innovation Minister Francois-Philippe Champagne said the review would focus on “affordability, competition, and innovation.”
According to the companies, Shaw’s board has approved the C$40.50-per-share cash offer and the transaction is not conditional on financing. The plan is for Shaw CEO Brad Shaw and another director to join the Rogers board.
In addition, the Shaw family would become a major shareholder in the combined company, with 60 percentage of its shares in Shaw Communications being exchanged for 23.6 million Class B shares of Rogers.
The deal, which would result in a reduction of market competition, is still awaiting approval from the Canadian government. Currently, Canadian residents have four options for mobile operators — Rogers, Shaw, Telus Corp. and BCE Inc. — but if the deal is approved, Canadians will have one fewer provider to choose from.
Rogers’ finance chief, Tony Staffieri, said the company was not looking to sell cable firm, Cogeco, in which it owns a 34-percentage stake, or any other assets.
“Shaw was always seen as a solid fourth player in Canada. When you’re talking about taking out that fourth player, I do see that there are some regulatory risks for this,” said Stephen Duench, portfolio manager at AGF Investments, whose firm owns shares in both companies.