Rogers to Buy Shaw for $20.8 Billion As Canada's Biggest Cable Giants Plan Merger

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Calgary's Shaw family is backing the merger deal spearheaded by the Rogers family of Toronto.

Rogers Communications is set to acquire rival cable giant Shaw Communications for $26 billion (US$20.8 billion).

The deal, pending regulatory and shareholder approvals, will combine two Canadian cable, broadband Internet and wireless phone giants as the country heads towards a 5G rollout. As part of the deal, Rogers will purchase Shaw class A shares and class B shares for CAN$40.50 (US$32.40) each, which represents a 70 percent premium to Shaw's class B share price.

The Shaw Family Trust, which represents Calgary's Shaw family and the controlling shareholder of Shaw Communications, has agreed to vote in favor of the merger deal. The transaction includes about CAN$6 billion of debt to roll into Rogers Communications, which is controlled by the Rogers family of Toronto.

Combining Rogers and Shaw to accelerate growth in wireless broadband and network investments follows a legacy media business where Shaw dominated in western Canada and Rogers consolidated its operations in Ontario and Quebec. Acquiring Shaw will allow Rogers to better compete in western Canada against Telus Corp. and BCE.

As Rogers looks to expand its 5G rollout in western Canada, it has promised to invest CAN$2.5 billion in 5G networks over the next five years across Western Canada. The proposed takeover deal is expected to close in the second half of 2022 as both companies will need to answer likely anti-trust concerns from the federal government and the CRTC, Canada's TV and telecom regulator.

"This transaction will create Canada’s most robust wholly-owned national network, and as a result of the combined spectrum holdings and enhanced capacity, will generate more choice and competition for businesses and consumers, as well as realizing the full benefits of next generation networks for Canadians and Canada’s productivity," Rogers and Shaw said in a joint statement on Monday.

Media analysts were quick to zero in on the proposed merger allowing Rogers to mount a national rollout of its 5G wireless offering to consumers. "We believe the transaction carries strong strategic and operational benefits to Rogers as it effectively doubles its wireline footprint and provides national scale. Moreover, the combined entity will be much better positioned to deploy and leverage 5G wireless technology over the medium term," Tim Casey, an analyst at BMO Capital Markets, said in a March 15 investors note.

Rogers last year teamed up with U.S. cable giant Altice USA to launch an unsolicited offer for Cogeco, the Quebec-based cable giant controlled by the Audet family of Monteral. That takeover deal, which would have seen Altice acquire Cogeco's U.S. unit, Atlantic Broadband, while the target company's Canadian assets would have gone to Rogers, was ultimately rebuffed by Cogeco's controlling shareholder.

The proposed merger of Rogers and Shaw's cable units opens the way for possible job cuts, with both companies forecasting synergies would exceed $1 billion annually within two years of closing the transaction.

"Shaw’s skilled workforce is integral to the success of the combined company. Following the close of the transaction, Rogers will maintain a strong local employee base in Western Canada so that local teams can continue to serve local consumer, business and government customers and their communities," Rogers added in a statement as it looks to secure regulatory approval for the deal.

Rogers Sports & Media, the media arm of Rogers Communications, has already imposed a series of job cuts as it drives into the streaming and digital entertainment spaces. The Shaw family is also the controlling shareholder of Corus Entertainment, a major buyer of American series from studio suppliers that has been hit with its own round of pandemic-era layoffs, especially at its Global News division.

With Rogers proposing to acquire Shaw Communications in response to a shifting wireless phone and broadband networks market, speculation will renew that the Shaw family may be seeking a buyer for Corus Communications as Canadian consumers increasingly embrace Netflix and other streaming TV services.

Rogers Sports & Media, Corus and Canadian TV market leader Bell Media at the Los Angeles Screenings in 2020 followed the U.S. networks in mostly renewing American dramas and comedies on their prime time schedules north of the border amid the pandemic. But longer term, Canadian TV media companies face either driving into the streaming arena to compete against upstart U.S. digital players, or seeing their legacy TV networks continue to lose ground amid cable-cutting and changing consumer viewing habits.