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Rogers, Shaw stocks climb as court clears path for $26B merger

Ethernet cables are seen in front of Rogers and Shaw Communications logos in this illustration taken, July 8, 2022. REUTERS/Dado Ruvic/Illustrations
Ethernet cables are seen in front of Rogers and Shaw Communications logos in this illustration taken, July 8, 2022. REUTERS/Dado Ruvic/Illustrations

Canada’s Competition Tribunal has ruled that Rogers Communications’ (RCI-B.TO)(RCI) plan to buy rival Shaw Communications (SJR-B.TO)(SJR) would not cause “materially higher prices” for consumers in Western Canada, or substantially weaken competition in the nation’s highly-consolidated telecom industry.

Announced late Thursday, the Tribunal’s move to dismiss an application from Canada's competition watchdog removes a key hurdle for the proposed $26-billion deal between two of the country’s largest providers of internet, cellular and television services.

Rogers shares climbed more than five per cent in early trading in Toronto on Friday. Shaw’s stock jumped nearly 10 per cent.

The ruling follows weeks of hearings on how the combination would reshape the industry, with competitors Bell (BCE.TO)(BCE) and Telus (T.TO)(TU) raising concerns that they would be unable to compete.

Throughout the talks, the Competition Bureau argued the deal would weaken competition, cause higher prices, and lead to poor service. In its ruling, the Tribunal says the merger is not likely to “prevent or lessen competition substantially.”

A more detailed decision is set to be released in the next two days.

The deal, which includes the sale of Shaw-owned Freedom Mobile to Quebecor-owned Videotron, still requires approval from Innovation, Science and Economic Development Canada. Quebecor agreed to buy Freedom in a $2.85 billion deal earlier this year.

"I am very disappointed that the Tribunal is dismissing our application to block the merger between Rogers and Shaw," Matthew Boswell, Commissioner of Competition for the bureau, said in a statement on Thursday. "We are carefully considering our next steps."

In a note to clients on Friday, RBC Capital Markets analyst Drew McReynolds says the Tribunal's yet-to-be released full decision will shed light on the probability of an appeal by the Competition Bureau.

McReynolds also called Thursday’s ruling an "incremental positive" for Rogers, Shaw and Quebecor shares, which was largely expected by the market.

Rogers, Shaw and the Shaw Family Living Trust have agreed to extend the outside date of the transaction to Jan. 31, 2023, from Dec. 31. Under the terms of the agreement with Quebecor, the final date for the acquisition of Freedom Mobile by Quebecor is automatically extended to Jan. 31, 2023.

With files from The Canadian Press

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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