Jameson Berkow

Anchor, Reporter

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Now that the courts have settled the question of who is actually in charge at Rogers Communications Inc. (RCI), one analyst expects the company “to proceed unencumbered” with plans to acquire Shaw Communications Inc. by mid-2022.

In a Monday morning note to clients, Drew McReynolds of RBC Capital Markets upgraded his rating of Calgary-based Shaw to the equivalent of a buy. He cited “a definitive resolution around the Rogers board dispute” that “appears sufficiently adequate” for regulatory reviews of its planned $20-billion sale to Rogers “to proceed unencumbered” as his rationale. 

In a brief statement released Sunday evening, Toronto-based Rogers Communications said it would not appeal last week’s British Columbia Supreme Court ruling upholding the authority of Edward Rogers - the only son of company founder Ted Rogers and chair of the family trust that holds nearly all of RCI’s voting shares - to replace corporate directors with a written resolution. The company itself, along with Mr. Rogers’ mother and two of his sisters, previously argued RCI board members could only legally be replaced through a months-long shareholder meeting process.

“Our primary focus through the family-board dispute at Rogers was on the timeline for a definitive resolution, acknowledging that any prolonged lack of family-board alignment could have repercussions for the Rogers-Shaw transaction,” McReynolds told clients. The regulatory review process is now “sufficiently on track for a [first half of 2022] closing date,” he said, noting Canadian Radio-television and Telecommunications Commision (CRTC) hearings on the proposed takeover are set to begin Nov. 22.

While the spread between the market value of Shaw shares and Rogers’ $40.50-per-share offer price “has remained stubbornly wide” since the transaction was announced in March, McReynolds said there “is a high likelihood” the deal will be approved on time. His price target matches the offer price, which represents a roughly 16 per cent upside from Friday’s closing price of Shaw stock.

There is a “reasonable likelihood” that Rogers will be required to sell some or all of Shaw’s wireless business - including Shaw Mobile and Freedom Mobile - in order to satisfy potential competitive concerns, McReynolds said via email, but “that should not impact the price that Shaw shareholders receive.”

“The onus here is on Rogers to get the deal approved, with Rogers bearing that risk,” he said.

Even in the “low-probability scenario where the deal does not close,” McReynolds wrote in his note to clients that “other potential strategic suitors for Shaw (such as Quebecor)” limited the downside risk in Shaw shares.