Rogers Communications said it has agreed to merge with telecom rival Shaw Communications in a $20 billion deal that will bring together the two largest cable operators in the country and create a Canadian wireless powerhouse. The deal, which was unanimously approved by the boards of directors of both companies, is expected to close in the first half of 2022, pending regulatory approvals.
Rogers and Shaw have been mostly friendly competitors over the years, swapping assets occasionally as Rogers concentrated on Ontario and Shaw focused on the Western provinces. Both companies are relatively similar as wireline service providers, as Shaw has about 5.2 million wireline revenue generating units (RGUs) and Rogers about 5.1 million. Their main difference has been on the wireless front. Rogers is the largest Canadian wireless company with 10.9 million customers, while Shaw is No. 4 with 2 million customers.
According to the transaction, Rogers will pay Shaw shareholders about C$40.50 ($32.40) per share in cash, a 70% premium to its Friday close, and assume about C$6 billion ($4.8 billion) in Shaw debt. The Shaw family will receive 23.6 million shares of Rogers stock in the transaction, making them one of the largest shareholders of the combined company.
In a press release, both companies pointed to the wireless opportunities the merger would bring, mainly allowing Rogers, already with the largest 5G network in Canada, to expand that technology throughout the country. Once the transaction is complete, the new Rogers plans to invest C$2.5 billion ($2 billion) in 5G networks across Western Canada, creating up to 3,000 new jobs. In addition, Rogers pledged to create a C$1 billion ($800 million) fund dedicated to connecting rural, remote and Indigenous communities to high-speed Internet across the four Western provinces and spend another C$3 billion ($2.4 billion) to support additional network, services and technology investments
“Western Canada is a major driver of our national economy and together we will have the scale, expertise and commitment to deliver the technology infrastructure needed to keep local communities connected, businesses competitive and attract new investment,” Rogers CEO Joe Natale said. “We’re at a critical inflection point where generational investments are needed to make Canada-wide 5G a reality. 5G is about nation-building; it’s vital to boosting productivity and will help close the connectivity gap faster in rural, remote and Indigenous communities.”
Rogers has been on the lookout to grow through acquisition for months. In September it teamed up with U.S. cable company Altice USA in a $7.8 billion bid to purchase Cogeco Communications: Altice would have assumed Cogeco’s U.S. cable operations. That bid was rejected by Cogeco’s controlling shareholder, the Audet family.
“Today’s announcement brings two iconic Canadian family-founded businesses together with the expertise, combined assets, and scale to deliver the next generation of telecommunications to Canadian consumers and businesses. This is a transformational combination; and extends our company’s long legacy of innovation, entrepreneurship, and dedication to world-class service for decades to come,” Rogers Communications chairman Edward Rogers said in a press release.
While Shaw has managed to hold its own -- it added 101,000 wireless customers in its fiscal first quarter ended Nov. 30 -- in April, the company laid off about 1,000 workers, mostly in its retail and sales operations. Its founder, executive chairman and former CEO JR Shaw died in March 2020.
“Our two companies have been successful because of the foresight and vision of two great founders who were driven by their unrelenting pioneering spirit and entrepreneurial values,” Shaw Communications executive chairman and CEO Brad Shaw said in a press release. “Without a doubt, my father would be proud of this moment, combining forces with the company founded by his old friend to deliver more Canadians world class connectivity, more choice, and better value. While unlocking tremendous shareholder value, combining these two great 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. This transaction will create benefits for generations to come.”
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