(Bloomberg) — Shaw Communications Inc. dropped to the lowest level in more than a year after saying that Canada’s antitrust agency is trying to block a takeover by Rogers Communications Inc.
Shaw was down 9.4% to C$34.11 at 10:56 a.m. in Toronto, the lowest since April 2021. Rogers and Shaw will have to agree to changes or divestitures that satisfy the Competition Bureau or fight before the country’s Competition Tribunal, a process that could take months.
The two companies received notice after markets closed on Friday that the antitrust agency plans to file an application to stop the merger. They said they remain committed to it and extended the closing deadline to July 31. Some analysts still believe the companies can complete their C$20 billion ($15.4 billion) transaction.
“Sometimes the Competition Bureau just wants to slow things, put forward its arguments to be discussed with or without the Competition Tribunal, and possibly resolve issues,” National Bank Financial analyst Adam Shine said in a note to investors.
Quebecor Negotiations
Rogers, which has offered C$40.50 a share for Shaw, wants to settle the matter out of court and has opened the door to selling assets to Montreal-based communications firm Quebecor Inc. to try to solve the antitrust concerns, according to a person familiar with the matter.
The wireless business is a key sticking point for regulators: Shaw’s Freedom Mobile unit is Canada’s fourth-largest wireless provider, with a presence in several major markets including Toronto and Vancouver. Rogers has long been the largest wireless company in Canada, with more than 11 million subscribers.
Rogers has drafted a deal to sell Freedom to Xplornet Communications Inc. But it’s possible that Quebecor ownership would be more acceptable to regulators because it already has 1.6 million wireless customers and has been a big spender on 5G spectrum.
The company spent C$830 million on wireless licenses in an auction last year, and some are in Western Canada and could potentially be used to upgrade Freedom’s service, which isn’t a 5G network. Quebecor Chief Executive Officer Pierre Karl Peladeau has publicly expressed interest in buying Freedom under the right conditions.
Rogers fell 6% to C$63.26. Quebecor fell 5.4%.
“I think that what it means is the bureau is trying to put pressure on the parties, Rogers and Shaw, to conduct a fairer sale of Freedom wireless — to try to find a stronger competitor to offload it to” than Xplornet, according to Mark Warner, principal at MAAW Law in Toronto.
“I’m not sure it really means we’ll actually see a contested merger. We might,” Warner said on BNN Bloomberg Television, referring to a merger that results in hearings at the Competition Tribunal. “But we do know that the commissioner of competition, Matthew Boswell, has talked about using the threat of litigation, if not litigation itself, to get better outcomes in negotiated settlements from parties.”
(Updates share price, adds Warner comments and other updates)
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