Noah Zivitz

Managing Editor, BNN Bloomberg

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Rogers Communications Inc.'s $20-billion takeover of Shaw Communications Inc. may well be on the rocks after Canada's competition watchdog recently sought to block the deal, but Bay Street hasn't given up hope — prompting one analyst to say Tuesday there's a buying opportunity for investors.

"We think a deal happens but it might occur in the fall rather than summer," wrote Adam Shine from National Bank of Canada Financial Markets in a report. He upgraded Shaw's Class B shares to outperform (the equivalent of buy) from sector perform (equivalent of hold), while also maintaining his price target of $40.50 per share, equal to the takeover price that Shaw agreed to in March 2021.

Rogers' acquisition of Shaw has already gone into overtime after the companies extended the outside date to complete the transaction to July 31 after previously stating they were aiming to close the deal by the end of June. The delay was triggered by the Competition Bureau's intervention this month, when it stated it is seeking to prevent the deal because of how it would diminish competition in the wireless industry.

Rogers and Shaw had sought to avoid that hurdle by lining up a buyer for Shaw's Freedom Mobile business. However, Competition Commissioner Matthew Boswell stated in documents filed with the Competition Tribunal on May 9 the divestiture proposed by the companies "is not an effective remedy for the competitive harm" that he said has already been caused by Rogers' planned acquisition of Shaw.

Shaw's shares sank seven per cent on the Toronto Stock Exchange in the first trading session after the Competition Bureau's objection was first disclosed, which widened the discount they've consistently traded at since the day the proposed takeover was announced last year. The closest they've come to hitting Rogers' offer price of $40.50 per share was $39.82 on April 13.

Despite Shine’s belief that Rogers and Shaw will overcome the regulatory hurdles and eventually close their deal, he cautioned in his report Tuesday that it could be a long process as the quasi-judicial Competition Tribunal hears the matter. That is, unless a settlement is reached.

"The better next step (than the Tribunal process) could be refreshed discussions between the Bureau and Rogers as well as Shaw which is likely to become more involved," Shine stated.

The broader analyst community is split on Shaw, with half of the 10 analysts tracked by Bloomberg having buy recommendations on the stock, and the other half stating it’s a hold.

In addition to the Competition Bureau, the takeover also still requires approval from the Ministry of Innovation, Science and Economic Development. It has already been approved by the Canadian Radio-television and Telecommunications Commission.