Canadian bid to block Rogers-Shaw mega-deal longer than locked

TORONTO, May 12 (Reuters) – Canada’s Competition Bureau has blocked Rogers Communications’ C$20 billion ($15.4 billion) bid to buy Shaw Communications, but the agency’s spotty track record regulation in legal fights raises the possibility that the agreement could be reached with more concessions.

The agency this week rejected the deal, saying it would undermine competition in a country that has some of the highest wireless rates in the world and where anger over high bills prompted Canada’s Liberal government to undertake to reduce prices.

Regulators also poured cold water on a proposal to fully divest Calgary-based Shaw’s wireless business Freedom Mobile, calling it insufficient to address competition concerns. Read more

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Armed with data showing that the big three Canadian telecommunications players – Rogers (RCIb.TO), BCE Inc (BCE.TO) and Telus (T.TO) – were able to charge higher prices in the markets where they dominated, the bureau hopes to win its challenge before the Competition Tribunal.

But an analysis of the Competition Bureau’s past regulatory battles makes the effort somewhat fanciful. Of the more than 1,500 mergers he has reviewed since 2009, only eight have ended up being challenged, six of which have been lost or settled. The other two are pending.

“More often than not, the office has failed to win such cases,” said a lawyer who specializes in anti-competition cases and who declined to be named due to the sensitivity of the situation. “Companies usually settle the case by presenting a consent agreement, or they use the efficiencies defense to win their case in court.”

Consent agreements, which stem from a form of dispute resolution, have been reached in 69 of the cases that have come to court over the past 13 years.

While the agency wouldn’t comment on its track record, it said it is negotiating a remedy or challenging any mergers deemed likely to harm competition in Canada.

Companies have often used Section 96 of the federal competition law to successfully defend their deals in the legal arena, arguing that the efficiencies gained from mergers outweigh the anti-competitive effects, officials said. lawyers.

Rogers, which has an empire that includes large stakes in mass media, wireless communications, the internet and cable TV, could present its efficiency defense in court, two other attorneys not associated with the case said. .

The Toronto-based company said it is prepared to defend the transaction in court and will file a formal response to the Competition Bureau’s injunction in due course.

Rogers also promised to accelerate its network development in rural Canada, expand combined network coverage and enter markets that currently have only one provider.

Still, the uncertainties clouding the Rogers-Shaw tie-up have chilled investors, with shares of Shaw (SJRb.TO) currently trading around 16% below Rogers’ offering price of C$40.50 per share. .

POSSIBLE REMEDIES

Many lawyers and analysts say the deal would find support once the Rogers-Shaw side presents a plan that goes beyond simply divesting the Freedom Mobile business.

“It’s about what merger remedies the companies are prepared to present to avoid a lengthy litigation process,” the anticompetitive lawyer said.

Lawyers point to an agreement in 2017 in which the Competition Bureau obtained consent with Bell to sell its six retail stores, 24,700 subscribers and 40 MHz of spectrum to regional player Xplornet in order to obtain authorization to buy Manitoba Telecom Services.

Cormark Securities said in a note this week that the remedy to address regulatory concerns could result in the sale of Shaw’s wireless business to Quebecor (QBRb.TO), a Montreal-based media and telecommunications company that primarily serves the Canadian province of Quebec.

A Canadian federal government source told Reuters on Wednesday that Quebecor is seen as a credible potential buyer for Freedom Mobile.

“The opportunities are plentiful and the alternatives promising,” Quebecor CEO Pierre Karl Péladeau said in a statement Thursday, discussing the prospect of acquiring Shaw’s wireless assets.

($1 = 1.3030 Canadian dollars)

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Reporting by Divya Rajagopal Additional reporting by Steve Scherer in Ottawa Editing by Denny Thomas and Paul Simao

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