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Shaw-Rogers Merger More Dependent On Cable Than Wireless

Gary Gambino profile picture
Gary Gambino


  • Regulatory objections to the merger of Canadian telcos Rogers and Shaw have centered on concentration in the wireless space.
  • Shaw's Freedom Mobile is a distant fourth place competitor, and the companies could find alternative solutions that don't kill the overall deal.
  • Shaw's wireline network is the real prize, creating a nationwide cable network from two non-overlapping networks existing today.
  • The 20% discount to the cash offer price makes Shaw worth the risk to buy at these levels.

Canada from space at night
Photo by Harvepino/iStock via Getty Images

The Deal

Canada's Shaw Communications (SJR) agreed to be taken over by Rogers Communications (NYSE:RCI) on March 15. The offer price is 40.50 (CAD) all in cash, except for members of the Shaw family who will

This article was written by

Gary Gambino profile picture
I am a Chemical Engineer by training and have an MBA with concentrations in Finance and Operations Management. I retired early after 22 years in the energy industry with roles in engineering, planning, and financial analysis. I have managed my own portfolio since 1998 and have met my goal to match the S+P 500 return over the long term with lower volatility and higher income yield. I plan to focus my writing on positions I already hold or am considering changing, however my bias is toward long-term holding unless there is a very compelling reason to sell.

Analyst’s Disclosure: I am/we are long SJR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (5)

Gary Gambino profile picture
Update: I sold my SJR shares at $26.79 USD following the announcement of the Competition Bureau's intent to oppose the deal. That's a very small capital gain plus 13 monthly dividends since I bought.
There is still a chance the companies could prevail in court, but the added uncertainty and time to close makes it not worth the risk. There is about 19% upside if the deal closes but over 30% downside to the SJR price before the merger was announced.
Go595lf profile picture
Thanks for the good article and great insight regarding the merge/acquisition. Is it the deal going on or will be held by regulators??
autofocus111 profile picture
When BCE acquired MBT, it was forced to divest part of the mobile subscriber base to T. I can envisage SJR's FreedomMobile also being split up as part of the current deal. Looking at the big-three mobile marketshare breakdown by province as per Fig 10.5 of the link below, T is dominant in BC and AB and weakest in ON. It would make sense then to allocate FreedomMobile's BC base to BCE, AB to BCE/RCI, and the ON base to T (or maybe QC's Videotron?). Interestingly QC is the only province with true 4-way competition. BCE already has a nationwide fiber backbone network (not sure about T).

Will the Shaw preferred shares: SJR.PR.A and SJR.PR.B be redeemed at par before the merger decision date?
Gary Gambino profile picture
@danayoneda Rogers has the option to force Shaw to redeem them on 6/30/2021. I don't have any opinion on whether they will exercise that or not.
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