As the legal fight between Canada’s competition bureau, Rogers Communications Inc and Shaw Communications Inc draws to a close on Wednesday, anxious investors will be hoping for a quick verdict to a 20-month old M&A battle.
Rogers’ C$20 billion ($14.8 billion) agreed bid for Shaw to create Canada’s No. 2 telecoms company behind BCE Inc was blocked by antitrust regulator on grounds it will lessen competition in a country where wireless rates are among the highest in the world.
The two telecoms companies owned by billionaire Canadian families, who have fought for decades to win market share, took their battle to Canada’s competition tribunal, arguing that Shaw faced bleak prospects in the absence of a Rogers takeover. They also pitched the deal as “pro-competition”, with a combined entity able to compete better in Canada’s concentrated telecom market.
At stake is one of Canada’s biggest ever M&A deal that has been many years in the making, along with millions of dollars in legal and financial advisory fees.
For the competition bureau, which has recently acquired more clout, it will be a test case for its ability to improve competition.
If the tribunal approves the deal, the companies will apply to Canada’s Industry Minister Francois-Philippe Champagne, who has the final say.
Investors betting on the deal to close have bid up Shaw shares in recent weeks, narrowing the discount at which Shaw shares trade with respect to Rogers offer price. On Tuesday, the discount dropped to 9% from as much as 18% in September.
Rogers-Shaw have offered to sell Freedom Mobile of Shaw to Quebecor Inc as a possible remedy, which the bureau rejected saying Quebecor is not an effective player to uphold competition.
In their final closing argument on Tuesday, the bureau argued the Shaw family stands to gain billions after the merger and so are the company executives who stand to gain “multi-million-dollar golden parachutes if the deal proceeds.”
The bureau has argued its opposition is to Rogers as the proposed buyer of Shaw and not to Shaw selling its assets per se. Shaw was given five options by its banker TD Securities to explore strategic initiatives for its business, the bureau said.
In their response, Rogers-Shaw-Quebecor said the bureau has not been able to establish that the deal leads to lessening of competition and that the commissioner’s assertion that Quebecor will be a less effective competitor by owning Freedom Mobile is un-quantified.
In their closing statement, the companies said the efficiencies of the deal quantified in millions of dollars overwhelms the alleged harm. Under Canadian competition act, if companies demonstrate a proposed merger’s efficiency is higher than the perceived harm, the deal can be cleared.
Canada’s competition tribunal hearing the dispute could come up with a verdict by the end of this year or early January according to court documents. US News