Canada’s merger tribunal has ruled in favor of Rogers Communications Inc. and Shaw Communications Inc. in a key antitrust case, removing one of the final obstacles to the merger of two of the country’s largest telecommunications companies.
Shares of both companies soared. Shaw soared 9 percent to $39.06 at 11:47 a.m. in Toronto, the highest level since April. Rogers was up nearly 6 percent at $63.51.
The federal antitrust commissioner could not prove that the deal would cause significant harm to competition in the industry, the Competition Tribunal said in a summary of its ruling late Thursday. The merger of Rogers and Shaw “is not likely to result in materially higher prices” or a decrease in service or innovation, the court concluded.
It’s a huge victory for the Canadian companies, which wrapped up a seven-month legal process that delayed their $20 billion (US$14.8 billion) transaction well past its original June closing date. But it’s not a done deal yet. Competition commissioner Matthew Boswell may try to appeal the ruling, and even if he doesn’t, the deal still requires approval from Prime Minister Justin Trudeau’s government.
“I am very disappointed that the Court dismissed our motion to block the merger between Rogers and Shaw. We are carefully considering our next steps,” Boswell said in a statement.
Industry Minister Francois-Philippe Champagne will review the court ruling “in detail” before making a decision, spokeswoman Laurie Bouchard said by email. The court has yet to issue the full text of his decision, meaning the minister’s review will not be completed until early 2023.
Rogers and Shaw said they welcomed the court’s statement and extended the deadline on their agreement to Jan. 31. The firms expected to close before December 31, which would have saved Rogers about $260 million that he will have to pay out to M&A holders of his. bonuses in January.
Rogers, Canada’s largest wireless company with more than 10 million telephone customers, has agreed to buy Shaw for $40.50 per share in March 2021 to grow its home Internet and cable TV businesses and add key network infrastructure in western Canada. After the acquisition, Rogers would have about $20 billion in annual revenue, the kind of scale the company says it needs to invest in 5G networks and compete with rivals BCE Inc. and Telus Corp.
Toronto-based Rogers also hoped to expand its leadership in wireless technology, its most lucrative line of business, through the acquisition of Shaw’s Freedom Mobile division. However, Champagne made it clear earlier this year that the government would not allow Rogers to take control of Shaw’s wireless licenses.
Then Boswell’s agency, the Competition Office, filed a request to block the deal on the grounds that it would hurt consumers by increasing costs or reducing service. That forced Rogers and Shaw to act: In June they signed a conditional agreement to sell Freedom Mobile to Montreal-based Quebecor Inc., which offers wired and wireless products to customers through its Videotron unit.
The latest transaction, worth $2.85 billion, will only happen if the larger Rogers-Shaw transaction is allowed to close. But it was key to Rogers’ court victory.
“Videotron is an experienced market disruptor that has achieved substantial success in Quebec. It has drawn on that experience to develop highly detailed and fully costed plans for its entry and expansion into the relevant markets in Alberta and British Columbia, as well as Ontario,” the court said on Thursday. Quebecor rose nearly 5 percent on Friday.
CONDITIONS OF THE MINISTER
“It is worth noting that there will continue to be four strong competitors in the Alberta and British Columbia wireless markets,” the court added. Rogers, Telus and BCE are the main wireless service providers in those two western Canadian provinces; Videotron would take Shaw’s place as the fourth.
Champagne, who is responsible for telecoms policy in the Trudeau government, appeared to signal his support for the deals by publicly setting out the conditions under which he would approve Quebecor’s purchase of Freedom. Quebecor has already agreed to those terms.
The three-person panel hearing the antitrust case, led by Chief Justice Paul Crampton, said it is working to release its full decision on Saturday night.
“Decisions by the Competition Tribunal are often successfully appealed and big questions remain unanswered in this summary decision,” said Keldon Bester, a fellow at the Center for International Governance Innovation and former special counsel to Canada’s Competition Bureau. He said it is “certainly possible” that Boswell may want to appeal it.
The Competition Office has 30 days to appeal and could request a stay of the court’s decision in the meantime, “but it is not obvious that this will be granted,” Adam Shine, an analyst at the National Bank of Canada, said in a note.
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