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Late on Friday, Rogers and Shaw agreed to sell Freedom Mobile unit to Quebecor Inc for C$2.85 billion, including wireless and internet customers, in a bid to assuage competition concerns over Rogers plan to buy smaller rival Shaw.
Canada’s competition commission on Monday said it would assess “remedy offers” to address the competition issues but that any remedy must eliminate a substantial reduction or prevention of competition due to the merger.
The commission had initially filed its objection to the merger last week, saying the sale of Freedom was not enough to maintain competition.
Rogers had previously attempted to sell Freedom to two other bidders, but the commission in its petition last month said those companies were not in a position to uphold competition in Canada, which has the world’s highest wireless charges.
Reuters previously reported that the government sees Quebecor as a credible buyer for Freedom, in a boost to Rogers’ latest effort.
“This is the best outcome possible for regulators looking to enhance the long term competition,” Mathew Dolgin, an equity analyst with Morningstar, wrote in note dated June 19.
Shaw shares rose 7.4% to C$37.21 – still a discount of 8.1% to Rogers’ offer price – while Rogers climbed 6%. Quebecor jumped 8.2%.
Both parties now will go to the competition tribunal to seek mediation and the case could close by June 28 if they reach a settlement, according to the competition tribunal website.
The companies said the move would ensure the government’s mandate of having a viable fourth competitor in Canada’s expensive telecom market.
“This deal will result into more completion… and is likely to receive regulatory approval from the Competition Bureau of Canada and the Canadian government,” said Cormark Securities in a research note dated June 20.
Investors betting on the merger completion are only giving it a 75% probability for the deal getting closed, traders told Reuters. Usually successful deals have a 90-95% probability, they added.
“There is still uncertainty (on) whether the deal will be approved by the competition bureau,” said a trader at New York-based asset management firm, who was not authorized to speak publicly on the matter.
A spokesperson for ministry of innovation, science and economic development said the ministry would review Rogers’ sale of Freedom as the regulator responsible for spectrum transfer.
($1 = 1.3005 Canadian dollars)
