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As part of its merger agreement with Shaw, Rogers promised to propose, negotiate and agree to almost anything that will help the deal gain regulatory approval.CARLOS OSORIO/Reuters

Rogers Communications Inc.’s RCI-A-T decision to sign an unusually broad “hell or high water” clause in its takeover bid for Shaw Communications Inc. SJR-N throws yet another variable into an already complicated acquisition now that the Competition Bureau is seeking a full block of the attempted takeover.

As part of its merger agreement with Shaw, Rogers promised to propose, negotiate and agree to almost anything that will help the deal gain regulatory approval. This would include selling or licensing “all or any part of [its] businesses.”

While such promises are common in takeovers that are sure to face intense regulatory scrutiny, Rogers went far beyond the norm and wrote almost no exceptions into the merger agreement. Instead, the company agreed to very broad language that stipulates it must make its “best efforts” to appease regulators. In other words, Rogers must get the deal done, come hell or high water.

As it stands, it may not come to this. If the Competition Bureau remains intent on blocking the deal full stop, and the Competition Tribunal agrees with its reasoning, the clause won’t matter all that much.

But if a crack of daylight emerges, and a regulatory body suggests a way for the deal to get done, the clause leaves Rogers with very little negotiating power.

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Should Rogers try to walk away from the proposed takeover at that point, it could face a lawsuit from Shaw, because the hell-or-high-water clause is one of the main reasons Shaw agreed to a deal with Rogers over BCE Inc.

During a bidding war between Rogers and BCE in early 2021, Shaw sought not only the highest offer possible, but also one that provided the most regulatory certainty, according to merger filings. Early in the negotiations, Rogers and Bell largely competed on price, but as the talks evolved, Rogers showed it was willing to agree to different regulatory covenants.

By the end of February, 2021, Shaw’s board of directors concluded that Bell’s “proposed regulatory approach was not as attractive as [that of Rogers] and contained conditions that were not acceptable to the board,” according to the deal proxy circular.

In early March, Shaw’s special committee of directors set up to evaluate the takeover offers was advised that Bell had “effectively withdrawn from the process as [the company] was not prepared to amend its proposal regarding certain regulatory issues.”

The Globe later reported that Rogers agreed to the hell-or-high-water clause, which could force it to sell not only Shaw’s wireless assets, such as customer accounts or airwaves, but also some of its own, and Bell was not prepared to take such a risk, according to two sources familiar with the deal.

Shortly after the Rogers-Shaw agreement was announced, analysts said Rogers would likely have to sell Freedom Mobile, Shaw’s wireless division, for the takeover to get the blessing of regulators. Rogers pushed back on that idea, but in recent months has tried to negotiate a sale.

In its announcement on Monday, the Competition Bureau made clear that it is fixated on the wireless business, writing that the proposed merger “would substantially prevent or lessen competition in wireless services.”

However, it did not mention the efforts to sell Freedom Mobile, which creates a bit of a black box for now. It is possible that a sale of this division, under certain terms, would appease the watchdog. But, as BCE originally feared, those terms could force the purchaser to unload some of its own wireless airwaves.

For now, that is merely speculation. But if such a scenario emerges, Rogers will be in a pickle. The company did not return a request for comment.

If this plays out, Rogers may argue it will simply pay Shaw the $1.2-billion break fee included in the merger agreement and walk away. However, break fees are common in any merger acquisition – and BCE had proposed one as well, albeit one that was worth less, The Globe has reported.

What helped make Rogers’ bid so unique, and so palatable to Shaw’s committee, as well as to Canadian Imperial Bank of Commerce, which provided an independent fairness opinion, were the “robust regulatory and financing covenants on the part of the purchaser,” according to merger documents.

That makes it much harder for Rogers simply to write a cheque and walk away.

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