$26B Rogers plan to buy Calgary-based Shaw would create Canada's 2nd-biggest telecom

The latest:

• Deal would create second-biggest telecom in Canada.
• Deal, valued at $26 billionincluding debt,will need approval from regulators.
• Shaw, currently Canada'sfourth-biggest telecom, owns Freedom Mobile and Shaw Mobile in Alberta, B.C. and Ontario.
• Transaction includes 3,000 net new jobs,proposed regional headquarters in Calgary.
• Unknown impact on existing jobs, customers.
• Are you a Shaw or Rogers customer? What do you think about the deal? Let us know in the comments or send your thoughts to Ask@cbc.ca.

Rogers Communications has signed a deal to buy Shaw Communicationsin a transaction valued at $26 billion, including debt,which would create Canada's No. 2 cellular and cable operator but is likely to face stiff regulatory scrutiny.

Under the plan, Rogers will pay $40.50 in cash for each of Shaw's issued and outstanding class A and class B shares.Shaw shares jumped 42 per centto $34 on Monday, but traded well below the offer price, suggesting doubts about the deal. Shares of Rogers were also up sevenper centat $64.

As part of the transaction, the companies said Rogers will invest $2.5 billion in 5G networks over the next five years across Western Canada.

Rogers also says it will create a new $1 billion fund dedicated to connecting rural, remote and Indigenous communities across Western Canada to high-speed internet service.

WATCH | Industry expert reacts to Rogers-Shaw deal:

Rogers' plan to buy Shaw a long time coming, portfolio manager says

3 years ago

Duration 0:27

Patrick Horan, a portfolio manager with Toronto-based investment service Agilith Capital, says he's been hearing about a potential deal between Rogers Communications and Shaw Communications for decades, but he was shocked when the news actually broke today.

By acquiring fourth-ranked Shaw, Rogers would leap pastcurrent No. 2Telusto take on market leader BCE Inc.,the publicly traded holding company for the Bell Canada group of companies. It would also be the biggest deal in Canadian telecoms history sinceBCE completed the spinoff of its stake in Nortel Networks in a transaction valued at $88.7 billion in 2000, according to Refinitiv data.

"It was always talked about that Rogers and Shaw would eventually get together. And for 30 years I've heard about it,"Patrick Horan, a portfolio manager at Agilith Capital, told CBC's Meegan Read on Monday."But today's the day it actually happened."

The announcement also helped lift Canada's main stock index in late-morning trading.The telecom sector led the way higher as the S&P/TSX composite index was up 19.76 points at 18,871.08.

Subject to approval, review

The deal, which requires shareholder approval, is subject to other customary closing conditions, as well as approvals from Canadian regulators. It is expected to close in the first half of 2022.

The deal will face review by the independent Competition Bureau of Canada, the Canadian Radio-television and Telecommunications Commission (CRTC), as well as the federal department of Innovation, Science, and Economic Development (ISED).

Canadian Innovation Minister Franois-Philippe Champagne said in a statement that the review would focus on "affordability, competition, and innovation."

"Shaw was always seen as a solid fourth player in Canada. When you're talking about taking out that fourth player, I do see that there are some regulatory risks for this," said Stephen Duench, portfolio manager at AGF Investments, whose firm owns shares in both companies.

Rogers chief executive Joe Natale told analysts in a Monday morning conference call that it's too early to speculate on whether the competitors will be required to divest any of their operations.

"But we feel confident this transaction will be approved," Natale said.

Horan foresees approval challenges on the wireless side, but he does expect the deal to go through. "The question is, how do they treat wireless, Shaw wireless in particular. And that's sort of a trickier thing," he said.

"I have to believe that Rogers has something in their back pocket to say: 'We can carve out sort of special interests or regional interests for Shaw wireless and float them.'"

WATCH | A look at the Rogers-Shaw deal:

Rogers signs deal to buy Shaw in transaction valued at $26B

3 years ago

Duration 2:44

Rogers Communications has signed a deal to buy Shaw Communications in a transaction valued at $26 billion, including debt. The deal is expected to close in the first half of 2022, pending regulatory and shareholder approval.

Complaints of highbills

There's little overlap between the Shaw and Rogers cable and internet businesses, which are in Western and Eastern Canada respectively, so Natale said he thinks most of the focus will be on their wireless businesses.

"And I won't get into sort of what is our thinking on that, for obvious reasons," Natale said.

Rogers owns a national wireless network that does business under the Rogers, Fido and Chatr brands. Shaw owns Freedom Mobile and Shaw Mobile in Alberta, B.C. and Ontario.

Canada's telecoms industry came under the spotlight during the last federal election, with voters complaining about cellphone bills, which are among the highest in the world.

In March last year, Prime Minister Justin Trudeau's minority Liberal government ordered Canada's top threetelecom operators, which together control 89.2 per centof the market, to cut prices on their mid-range wireless service plans by 25 per centwithin two years or face regulatory action.

Sticking with its pledge of offering affordable wireless plans, Rogers said it would not raise wireless prices for Freedom Mobile customers for at least three years after the closure of the deal.

Laura Tribe, executive director of consumer advocacy group OpenMedia, said in a statement that the government shouldn't approve the deal. "We need more competition in Canada not less," Tribe said in a statement.

"Over the years, we've seen competitor after competitor swallowed up by the Big Three. The result is always the same more profits for the Big Three, worse plans and less choice for Canadians. We can't afford this deal."

'Tremendous' value

Executives from the two companies revealed few details regarding how they expect to achieve $1 billion of synergies, which will be mostly from cost savings.

However, they did say that savings in operating expenses will likely be more significant thansavings from capital spending on equipment.

Rogers chief financial officer Tony Staffieri said the company was not looking to sell cable firmCogeco, in which it owns a 34 per centstake, or any other assets.

However, the joint news conference made it clear that the leadership of the two family-controlled companies believe there will be great benefits from the combination.

"While unlocking tremendous shareholder value, combining [the]companies also creates a truly national provider with the capacity to invest greater resources expeditiously to build the wireline and wireless networks that all Canadians need for the long term," Shaw executive chair and CEO Brad Shaw said ina statement.

The combined company which will create up to 3,000 net new jobswill have a Western regional headquarters at Shaw Court in downtown Calgary, where the president of Western operations and other senior executives will be based.

Rogers said it has secured committed financing to cover the cash portion of the deal, while about 60 per cent of the Shaw family shares will be exchanged for 23.6 million Rogers B-class shares.

Brad Shawand another director to be nominated by the Shaw family which will become one of the largest Rogers shareholders will be named to the Rogers board.