A Competition Bureau lawyer grilled Brad Shaw, the CEO and executive chair of Shaw Communications Inc., SJR-B-T about the roughly $2.3-billion his family stands to receive if their company is successfully acquired by Rogers Communications Inc. RCI-B-T
Mr. Shaw told the Competition Tribunal on Wednesday that his family made the “extremely difficult” decision to sell the business they had run for 50 years to Rogers for $26-billion because it was the right thing to do for all of the company’s shareholders and other stakeholders, including its customers and its employees.
The company was losing market share to Telus in its internet and TV business, had not recouped the billions it had poured into its wireless division, and didn’t have the scale to make the investments needed to remain competitive, Mr. Shaw said. The Shaw family controls the Calgary-based telecom through its ownership of Class A voting shares.
The Competition Bureau is seeking to block the merger of Canada’s two largest cable networks, arguing the deal will lessen competition in the wireless sector because the divestiture of Shaw’s Freedom Mobile to Quebecor Inc. QBR-B-T for $2.85-billion will weaken Canada’s fourth-largest wireless carrier.
Alexander Gay, counsel for the Competition Bureau, noted during cross-examination that the Shaw family is set to receive a combination of cash and roughly 23 million Rogers shares, worth a total of about $2.3-billion if Rogers shares are valued at $60. (Shares of Rogers closed at $60.06 on the Toronto Stock Exchange on Wednesday.)
“You may very well have some overriding interest for shareholders, but certainly you stand to gain, and you stand to gain big,” Mr. Gay said. “So I find it hard to believe that you stand here today and suggest that somehow it’s all about the constituents and not yourself.”
Mr. Shaw replied that the merger is a last resort for the Shaw family, which “looked at every option but this.”
“At the end of the day it’s not about the dollars. It’s about the business and how we support it,” Mr. Shaw said.
A key issue in the hearings is whether the divestiture of Freedom to Quebecor’s telecom subsidiary, Videotron Ltd., would maintain the level of competition in the wireless sector.
The Competition Bureau has argued that Freedom would be a weakened competitor under Videotron’s ownership because Rogers is set to acquire a number of assets, including infrastructure and personnel, that currently support the wireless carrier.
In addition, lawyers for the competition watchdog have argued that the 20-year agreements that Videotron has entered into with Rogers to access cable infrastructure in Western Canada would leave Quebecor reliant on its rival as a supplier.
Mr. Shaw said he believes that the structure of the deal between Rogers, Shaw and Videotron leaves the Montreal-based telecom positioned to be “very competitive” if it is permitted to acquire Freedom.
“They get a retail network, they get a network that’s 5G-capable, and they get scale. And so when you look at those things, I think they’re more than capable of operating, more than capable of being very competitive within Western Canada and within wireless,” he said.
Another Competition Bureau lawyer questioned Donovan Annett, principal strategist, strategy architecture and engineering at Shaw, about the $1-billion that Rogers has promised to invest in remote and Indigenous communities across Western Canada if the deal goes through.
Derek Leschinsky, counsel for the Commissioner of Competition, noted that Rogers has not publicly disclosed any of the details regarding when and in which rural and Indigenous communities it will make those investments.
“If no one knows what the communities are, and ... Rogers doesn’t invest in them, there can be no [public] backlash,” Mr. Leschinsky said.