As a court opens the way for a $26B merger, Shaw stocks rise
Canada’s Competition Tribunal has ruled that Rogers Communications’ (RCI-B.TO)(RCIShaw Communications (a rival of Shaw Communications) will be purchased by ).SJR-B.TO)(SJR) would not cause “materially higher prices” for consumers in Western Canada, or substantially weaken competition in the nation’s highly-consolidated telecom industry.
The announcement was made late Thursday Tribunal’s move to dismiss an application from Canada’s competition watchdog removes a key hurdle for the proposed $26-billion deal between two of the country’s largest providers of internet, cellular and television services.
Rogers shares rose by more than five percent in Toronto’s morning trading. Shaw’s stock jumped nearly 10 per cent.
Following weeks of hearings, the decision comes after Bell and other competitors Bell argued that the combination would change the industry.BCE.TO)(BCETelus (T.TO)(TUThey are concerned that they will not be able to compete.
During the talks, Competition Bureau argued that the deal would reduce competition, increase prices, and result in poor service. In its ruling, the Tribunal says the merger is not likely to “prevent or lessen competition substantially.”
In the coming days, a more detailed decision will be made.
Innovation, Science and Economic Development Canada still needs to approve the deal, which includes the sale Shaw-owned Freedom Mobile and Quebecor-owned Videotron. Quebecor bought Freedom earlier this year in a $2.85billion deal.
Matthew Boswell was the Commissioner of Competition for the bureau. He stated in a Thursday statement that “I am very disappointed” that the Tribunal rejected our request to block the merger between Rogers & Shaw. “We are taking careful consideration of our next steps.”
Drew McReynolds, RBC Capital Markets analyst, wrote Friday to clients that the Tribunal’s full decision has yet to be released and will provide insight into the possibility of a Competition Bureau appeal.
McReynolds also called Thursday’s ruling an “incremental positive” for Rogers, Shaw and Quebecor shares, which was largely expected by the market.
Rogers Shaw, Shaw, and Shaw Family Living Trust have all agreed to extend the transaction’s outside date to January 31, 2023. This is in addition to the December 31, 2022 deadline. According to the agreement with Quebecor the last date for Freedom Mobile acquisition by Quebecor is automatically extended until January 31, 2023.
With files from The Canadian Press
Jeff Lagerquist, a senior reporter for Yahoo Finance Canada, is Jeff Lagerquist. Follow him on twitter @jefflagerquist.