Proactive Investors - Rogers Communications (TSX:RCIa) (NYSE:RCI) Inc has received the go-ahead from the Canadian government to acquire competitor Shaw Communications (TSX:SJRb) (TSX:SJR.B) Inc in a move that would create the second-largest telecommunications company in the country.
Approval of the $20 billion deal was announced by Industry Minister François-Philippe Champagne Friday morning in Ottawa, albeit with conditions.
For example, Rogers will be required to create 3,000 new jobs in Western Canada and invest $5.5 billion ($2.5 million specifically in Western Canada) to expand 5G coverage and services. Additionally, a side deal will see Quebecor (TSX:QBRa) (TSX:QBR.B) Inc buy most of Shaw’s wireless business, assuaging some antitrust concerns.
Rogers faces fines of as much as $1 billion if it breaks the conditions of the deal, Champagne said.
Shares of Shaw increased 3.3% Friday morning to C$40.44 in Toronto, close to the takeover price of C$40.50 per share.
The deal is expected to close by April 7, and the combined company will offer wireless, home internet and cable television to more than 10 million Canadians across the country, bringing in annual revenue near C$20 billion (US$14.8 billion).
The move is a long time coming. Rogers agreed to buy Shaw for $20 billion in March 2021 but received pushback over market share concerns. The companies planned to merge in mid-2022, but Canada’s antitrust watchdog sued to block the takeover.
That ultimately led to Rogers and Shaw making a deal with Quebecor (TSX:QBR.B), a major provider of cable and wireless services in the province of Quebec. The Montreal firm will acquire Freedom Mobile, which represents the majority of Shaw’s 2.3 million wireless accounts, making Quebecor (TSX:QBR.B) Canada’s fourth-largest telecoms company.
The merger does present some synergistic opportunities. Rogers is strong in Ontario and the eastern parts of Canada, while Shaw is more dominant in western provinces. Acquiring Shaw gives Rogers the scale it says it needs to roll out 5G service and compete with Canada’s biggest telecommunications firm, BCE Inc. (TSX:TSX:BCE)
It's also the culmination of a longstanding relationship between executives of the companies. The late founders of the companies, Ted Rogers and JR Shaw, were friends who occasionally did deals together and their sons, the chairman and CEO of their respective companies, have known each other since childhood, according to reports.