TORONTO (Reuters) – Rogers (NYSE:ROG) Communications Inc’s long battle to buy smaller rival Shaw Communications (NYSE:SJR) Inc overcame a major hurdle after the Canada Competition Bureau dropped plans to kill the deal following two defeats in courts in less than a month.
The bureau late on Tuesday accepted the verdict of the Federal Court of Appeal (FCA) and said it would not pursue an appeal.
Its decision is widely seen as paving the way for the C$20 billion ($14.98 billion) transaction to clear ahead of its Jan. 31 deadline.
It now awaits final clearance from Industry Minister François-Philippe Champagne, who has previously expressed support for the transaction if certain conditions are met.
Comark Securities said in a report that the final decision is expected to be prompt, allowing the companies to close ahead of the deadline.
On Tuesday, Champagne said he would make a decision in due course, adding that “competition and affordability in the telecom sector remains top priority”.
Rogers and Shaw shares rallied nearly 3% on Tuesday, with the discount on Shaw’s share price versus Rogers’ offer price narrowing to less than 3%, underscoring market’s optimism for the deal’s success.
The other potential hurdle that could delay the closing is a second review by Canada’s federal lawmakers to be launched on Wednesday.
The House of Commons industry committee in March said the deal should not proceed, though, its recommendations are non-binding.
“The result is what I expected,” said Michael Osborne, a competition lawyer at law firm Cozen O’Connor. “The Commissioner’s appeal was based on four highly technical arguments. The FCA went on to reject all of those technical arguments,” Osborne added.
Rogers’ planned purchase of Shaw would create Canada’s No. 2 telecoms company and the bureau argued it would lessen competition in a country where wireless bills are already among the highest in the world.
But the Competition Tribunal rejected the case in late December, prompting the bureau to file an appeal.
Rogers-Shaw have agreed to sell Freedom Mobile, a wireless business owned by Shaw, to Quebecor Inc in order to alleviate competition concern.
Champagne said Quebecor unit Videotron should hold the Freedom Mobile unit for at least 10 years and that prices for wireless services in Ontario and Western Canada should be comparable to what Videotron is offering in Quebec, which currently are on average 20% lower than in the rest of Canada.
($1 = 1.3352 Canadian dollars)