Rogers-Shaw Merger Gets Final Approval, With Freedom Mobile Sold to Quebecor

After two years and numerous twists and turns, Rogers RCI.B and Shaw SJR.B have received the final approval needed to complete their merger, with consent from the industry minister for Innovation, Science, and Economic Development. As previously agreed, Quebecor QBR.B will take over Freedom Mobile, which comprises most of Shaw’s wireless business. ISED formalized some requirements for Rogers and Quebecor, but most of these were consistent with terms the two companies previously stated were acceptable. Nothing in the approval changed our long-held view that the deal is valuation neutral for Rogers and positive for Quebecor. We already expected the deal to be approved, so we are maintaining our fair value estimates of CAD 73 for Rogers and CAD 35 for Quebecor.

Rogers and Quebecor released few details regarding how Shaw’s asset base is being split up and the exact portion of Shaw’s wireless subscriber base associated with Freedom Mobile rather than the relatively small Shaw Mobile, which goes to Rogers. We will look forward to refining our assumptions when we get that information. Rogers revised high-level 2023 guidance upon receiving news of the approval. Expectations are generally consistent with what we would expect after incorporating Shaw’s wireline business, which makes up the bulk of what Rogers is receiving.

To us, the key for Rogers is to realize most of the cost synergies it initially anticipated, and nothing in the terms of the March 31 approval leads us to doubt that achievement. Most of the requirements put on Rogers simply formalize items Rogers already promoted when announcing the proposed merger. If Rogers can achieve the cost synergies, they will offset the premium we feel it is paying for Shaw. We don’t expect major benefits from holding the expanded wireline network, and we think the sale of Freedom Mobile is beneficial, eliminating some cash costs for a Shaw wireless business that was struggling and largely redundant to what Rogers already has.