Bets on Rogers-Shaw deal approval rise after mobile unit sale, stocks rally

TORONTO, June 20 (Reuters) – Shares of Shaw Communications (SJRb.TO) and Rogers Communications (RCIB.TO) rallied on Monday on expectations that the sale of Shaw’s mobile unit will eventually pave the way for approval of the C$20 billion deal to purchase Canadian telecommunications carriers ($15.4 billion).

Late Friday, Rogers and Shaw agreed to sell the Freedom Mobile unit to Quebecor Inc. (QBRb.TO) for C$2.85 billion, including wireless and internet customers, in a bid to ease concerns concerning competition regarding Rogers’ plan to buy its small rival Shaw.

Canada’s Competition Commission said Monday it would assess “offers of remedies” to resolve competition concerns, but any remedy must eliminate a substantial lessening or prevention of competition as a result of the merger.


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The commission originally filed its objection to the merger last week, saying selling Freedom was not enough to maintain competition. Read more

Rogers had previously tried to sell Freedom to two other bidders, but the commission, in its petition last month, said those companies were unable to maintain competition in Canada, which has the highest wireless rates. in the world. Read more

Reuters previously reported that the government viewed Quebecor as a credible buyer of Freedom, following Rogers’ latest effort.

“This is the best possible outcome for regulators looking to improve competition over the long term,” Morningstar equity analyst Mathew Dolgin wrote in a June 19 note.

Shares of Shaw rose 7.4% to C$37.21 – still an 8.1% discount to Rogers’ offer price – while Rogers climbed 6%. Quebecor jumped 8.2%.

The two sides will now go to the competition court to seek mediation and the case could be closed by June 28 if they reach a settlement, according to the competition court’s website.

The companies said the move would ensure the government’s mandate to have a viable fourth competitor in Canada’s expensive telecommunications market.

“This deal will result in more completion … and is likely to receive regulatory approval from the Competition Bureau of Canada and the Canadian government,” Cormark Securities said in a research note dated June 20.

Investors betting on the merger’s completion give it just a 75% chance of the deal going through, traders told Reuters. Usually, successful trades have a probability of 90-95%, they added.

“There is still uncertainty [on] whether the deal will be approved by the competition bureau,” said a trader at a New York-based asset management firm, who was not authorized to speak publicly on the matter.

A spokesperson for the Department of Innovation, Science and Economic Development said the department would review Rogers’ sale of Freedom as the regulator responsible for spectrum transfer.

($1 = 1.3005 Canadian dollars)

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Reporting by Divya Rajagopal, editing by Deepa Babington

Our standards: The Thomson Reuters Trust Principles.

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