RCI.B) Remove roadblocks? By The Motley Fool
© Reuters. $26 billion merger: Can Rogers (TSX:RCI.B) remove the hurdles?
Potential partners Rogers Communications (TSX:) (:RCI.B)(NYSE:RCI) and Shaw Communications have postponed the completion of their business combination to July 31, 2022. As the companies affirmed their commitment to the $26 billion merger in telecommunications industry, they need to clear the roadblocks first.
On March 24, 2022, the Canadian Radio-television and Telecommunications Commission (CRTC) approved Rogers’ takeover of Shaw, but the deal is subject to several conditions and safeguards. It was a victory, however, and one less obstacle. However, parties opposed to the deal have received support from Canada’s Competition Bureau.
New twist Rogers and Shaw will face the Competition Tribunal after the federal regulator filed motions to block the deal. On May 9, 2022, their stock prices fell 4.14% and 7.16%, respectively. As of this writing, Rogers is trading at $64.81 per share and is up 8.39% year-to-date. It pays a decent dividend of 3.10%.
The Competition Bureau said that after a rigorous investigation, it found that competition between Rogers and Shaw had already diminished. He added that the harm will continue, if not get worse. Competition Commissioner Matthew Boswell said, “We are taking action to block this merger to preserve competition and choice for an essential service that Canadians expect to be affordable and of high quality.
Not a deal breaker Many analysts don’t see the latest twist as a deal breaker for Canada’s third-largest phone company. Drew McReynolds of RBC (TSX:) Capital Markets believes Rogers will eventually get approval. National bank of Canada (TSX:) Financial markets analyst Adam Shine said the odds of a Rogers takeover are still over 50%.
However, Mr. Shine added that the review process could drag on for months. Rogers and Shaw will file their response with the Competition Tribunal 45 days after the applications, and then the Bureau must respond within 14 days. The third and final hurdle is Innovation, Science and Economic Development Canada (ISEDC).
No full takeover Industry Minister Francois-Philippe Champagne is against a full takeover because it is fundamentally incompatible with the policies of the Trudeau government. So Rogers sees Shaw’s Freedom Mobile as key to a successful merger, and offloading the wireless division could address antitrust concerns.
Quebecor is a potential acquirer if the company has expansion plans beyond Quebec. Its CEO, Pierre Karl Péladeau, declared: “We believe that these alternatives position us very favorably, while the governmental and administrative authorities, including the CRTC, pursue the public policy of establishing the conditions for true competition in services wireless in Canada.
Globalive Capital also has an interest in acquiring Freedom Mobile. The company recently entered into a spectrum and network sharing agreement with TELUS, although the latter has no financial investment. Its president, Anthony Lacavera, “We and TELUS believe we are a strong partner for Rogers to gain approval for the merger with Shaw.”
However, some sources say that ECB (TSX:) and TELUS want the federal government and the Competition Bureau to block Quebecor’s purchase of Freedom Mobile.
Finding an effective remedy According to Mr. Boswell, the Rogers and Shaw divestiture proposal is not an effective remedy for competitive harm. But for National Bank’s Mr. Shine, it doesn’t make sense for the bureau to reject the proposal. Meanwhile, the case is in play.
The $26 billion post-merger: Can Rogers (TSX:RCI.B) break down the hurdles? appeared first on The Motley Fool Canada.
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV and TELUS CORPORATION.
This article first appeared on The Motley Fool