Freedom Mobile Sale to Quebecor Likely to Increase Chances of Rogers-Shaw Approval: Analysts

After Rogers announced on late Friday it had agreed to sell Shaw’s Freedom Mobile to Quebecor for $2.85 billion, reaction from analysts on Monday suggest the move has likely increased the chances of the Rogers-Shaw merger getting approved by regulators.

According to a compilation of analyst commentary from Canaccord Genuity, Desjardins Capital Markets and National Bank of Canada Financial Markets, BNN Bloomberg reports the latter group believes there’s a very high chance of the Rogers-Shaw merger to proceed.

Canaccord Genuity’s Aravinda Galappatthige said in a note to clients on Monday, “we believe this agreement increases the prospect of the (Rogers-Shaw) transaction closing to over 95 per cent,” while also upgrading Shaw’s Class B shares to a “buy” rating with increased price target to $40.50, up from $35. The analyst also believes the sale of Freedom will allow Rogers to acquire Shaw Cable assets.

Desjardins Capital Markets says the strengths of Quebecor and the latter acquiring Freedom Mobile will make it more difficult for the regulator to argue against the Rogers-Shaw merger.

According to National Bank of Canada Financial Markets, analyst Adam Shine believes the Competition Bureau is “incorrectly [assuming] that the buyer of Freedom can’t at least match Shaw’s wireless efforts and competitiveness.” He pointed out Quebecor’s wireless marketshare of nearly 23% in Quebec as an example of the company’s ability to increase wireless competition.

A negotiated settlement between Rogers, Shaw, and the Competition Bureau “would be the appropriate and most expeditious route” to closing the merger, added Shine.

While Quebecor would acquire Freedom Mobile and its assets, the sale would still send 450,000 Shaw Mobile wireless users to Rogers, according to Rogers CEO Tony Staffieri, speaking to analysts in weekend briefings.

The Rogers-Shaw merger is being opposed by the Competition Bureau, while it still needs approval from Innovation, Science and Economic Development Canada. The CRTC has approved the Rogers-Shaw deal, for the transfer of broadcasting assets, despite opposition from consumer groups.

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