Rogers agrees to buy Shaw for CAD26bn, subject to regulatory approval

16 Mar 2021

Rogers Communications – Canada’s largest mobile operator and second largest fixed broadband provider by subscribers – has reached an agreement to buy Shaw Communications, which currently occupies fourth place in both the fixed broadband and mobile markets nationally. Rogers agreed to acquire all of Shaw’s Class A and B shares in a transaction valued at CAD26 billion (USD20.8 billion) including around CAD6 billion of Shaw’s debt, and to issue 23.6 million Rogers shares to the Shaw Family Living Trust, making the latter one of the largest shareholders in Rogers. The deal is subject to regulatory approval, with a target of completion in the first half of 2022.

Rogers has pledged to invest CAD2.5 billion in 5G networks over the next five years across Shaw’s heartland of Western Canada to ‘accelerate the delivery of critical 5G service … from rural areas to dense cities, more quickly than either company could achieve on its own’. Additionally, Rogers will commit to establishing a CAD1 billion fund to connect rural, remote and Indigenous communities across Western Canada to high speed internet, while earmarking a further CAD3 billion to ‘support additional network, services, and technology investments’ across the region. Rogers added that it will expand its ‘Connected for Success’ programme to every location where the combined company offers internet services, providing low-cost access for low-income Canadians. Rogers plans to establish a headquarters for all Western operations (Alberta, British Columbia, Manitoba and Saskatchewan) at Shaw’s HQ in Calgary, with a combined 10,000 employees across the four provinces, while it claimed that ‘new technology and network investments will create up to 3,000 net new jobs’ in the region.

Under the deal terms, Shaw’s Class A/B shareholders will receive CAD40.5 per share – roughly a 70% premium on the Class B share price. The Shaw Family Living Trust and certain Shaw family members will receive 60% of the consideration for their shares in the form of 23.6 million Class B Rogers shares, and the balance in cash. The deal requires two-thirds approval at a Shaw shareholders meeting in May 2021, but the Shaw Family Living Trust has already agreed to vote all its Class A shares (79% of outstanding Class A shares) and Class B shares in favour, while the transaction has been unanimously approved by the boards of directors of Shaw and Rogers. Additionally, Rogers has the right to cause Shaw to redeem its outstanding preferred shares on 30 June 2021.

TeleGeography says the deal could face significant anti-competition obstacles in the wireless sector, where the federal government has aimed to maintain regional choice of network operators and encourage new entrants – although potentially in the proposed merger’s favour, federal policy also focuses on encouraging investment and bringing down user costs. Rogers and Shaw say they intend to ‘work cooperatively and constructively’ with Innovation, Science & Economic Development Canada (ISED), the Competition Bureau and the Canadian Radio-television & Telecommunications Commission (CRTC). Shaw vies closely with chief regional rival Telus for the title of largest broadband ISP in Western Canada, while in terms of Canada’s largest cable TV/cable broadband providers, Shaw ranks second behind Rogers, which serves Ontario and Atlantic provinces with its cable network. Shaw subsidiary Freedom Mobile’s network covers cities across British Columbia, Alberta and Ontario, while its sub-brand Shaw Mobile – launched in July 2020 – focuses on bundling with Shaw’s fixed network services in British Columbia and Alberta. Rogers has promised not to increase Freedom Mobile end-user prices for at least three years following the proposed takeover.