Shaw Sale to Rogers ‘Extremely Difficult’ for Family, Says Shaw CEO

Shaw Communications CEO Bradley Shaw told the Competition Tribunal on Wednesday that it was “extremely difficult” for the Shaw family to give up the business and agree to Rogers’s proposed $26 billion takeover of the company (via Financial Post).

Canada’s fourth-largest telecom operator has been a family affair since its inception. Bradley Shaw took over as CEO in 2010 from his late older brother Jim Shaw, who had been handed the mantle by his father and company founder JR Shaw.

“It’s all we’ve done. We’re an operating family,” Shaw told the Tribunal during Wednesday’s hearing. However, the Shaw CEO said his company can’t continue to invest in the services and products that customers want.

He said that Shaw’s primary competitor in Western Canada, Telus, has outspent it in the region by $7 billion in the last five years. The exec added that Shaw has invested $5 billion in its wireless business “and not made one dollar in cash flow” from it.

“We take pride in what we’ve done, what we’ve been able to build all over 50 years, but we also have an obligation to our shareholders.”

Shaw’s comments echoed a narrative presented earlier in the week by Shaw CFO Trevor English that the company doesn’t have “a viable path forward” if the Rogers deal falls through. Testifying before the Tribunal, English said Shaw was underperforming financially, falling behind Telus, and didn’t have the capital to invest in both the wireline and wireless segments long-term.

“(We) believe we don’t have the scale and size to make investments to truly innovate (and) to truly give customers the services and products they want, so as we made the decision to sell,” Bradley Shaw told the Tribunal.

The Competition Bureau, which is on the other side of these Tribunal hearings against Rogers-Shaw, is seeking a complete block of the merger over concerns it will decrease competition and increase prices.

During Wednesday’s cross-examination, Competition Bureau counsel Alexander Gay pointed out that the Shaw family will receive a mix of cash and roughly 23 million Rogers shares collectively worth a total of about $2.3-billion if the deal goes through.

“You may very well have some overriding interest for shareholders, but certainly you stand to gain, and you stand to gain big,” Gay noted. “So I find it hard to believe that you stand here today and suggest that somehow it’s all about the constituents and not yourself.”

Bradley Shaw responded by saying that the merger is the last resort for the Shaw family, which has already considered every other option. “At the end of the day it’s not about the dollars. It’s about the business and how we support it,” he said.

The Bureau on Tuesday also challenged Shaw’s claims of having no “viable path forward” by bringing up its profitability.

Rogers-Shaw’s proposed sale of Shaw-owned Freedom Mobile to Quebecor’s Vidéotron is a key point of contention between the two sides. While the merger hopefuls are presenting it as a remedy to the Bureau’s antitrust concerns over their merger, the Bureau is far from convinced.

Canada’s Commissioner of Competition kicked the Tribunal hearings off earlier this month by reiterating that the proposed Freedom sale isn’t enough to win its approval.

The Bureau is the last of three regulators, including the Canadian Radio-television and Telecommunications Commission (CRTC) and Innovation, Science and Industry (ISED) Canada, that need to sign off on the deal.

Tribunal hearings to determine the fate of the Rogers-Shaw deal will last four weeks, with oral arguments scheduled for mid-December. A decision from the three-member panel overseeing the proceedings is expected in January.

Rogers and Shaw previously extended their mutual merger deadline to December 31, 2022, hoping to close the deal by that time. However, the telcos have room for a further extension up to January 31, 2023.