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Shaw Communications Agrees to $26 Billion Buyout Offer From Rogers Communications

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Shares of Shaw Communications traded 42% higher after the company reported it entered into an agreement to be acquired by Rogers Communications in a transaction valued at $26 billion.

This morning before U.S. markets opened for trading, leading Canadian communications firms Shaw Communications Inc. (SJR:NYSE) and Rogers Communications Inc. (RCI:NYSE; RCI.A/RCI.B:TSX)) announced that "they have reached an agreement for Rogers to acquire all of Shaw's issued and outstanding Class A Shares and Class B Shares in a transaction valued at approximately $26 billion."

The report stated that Rogers has agreed to pay Shaw Class A and Class B shareholders $40.50 per share, which equates to about $20 billion, and will also assume approximately $6 billion of Shaw's outstanding debt.

Rogers indicated that it has already secured committed debt financing and will use those proceeds along with cash on its balance sheet to fund the purchase of the shares. The transaction also includes a provision requiring Rogers to issue 23.6 million shares of its common stock in lieu of cash to the closely held Shaw Family Living Trust.

The newly combined entity is expected to build upon strength of the two family-founded companies, allowing them to scale capabilities in providing wireline, wireless, and broadband telecommunications services thus creating Canada's most robust wholly owned national integrated communications network. Subsequent to the purchase, to enhance its competitiveness, Rogers plans to invest $2.5 billion in 5G networks over the next five years across Western Canada. The merger will serve to bring together Shaw's existing cable, fiber and wireless networks with Rogers' national wireless network and extensive 5G capabilities.

The report mentioned that Rogers remains committed to offering affordable wireless plans and that it has agreed not to raise wireless prices for Freedom Mobile customers for a period of at least three years after the transaction is finalized.

Rogers Communications' President and CEO Joe Natale commented, "We are proud to join forces with the Shaw family and team as we combine our companies and our 10,000 team members across Alberta, British Columbia, Manitoba, and Saskatchewan, supported by a head office in Calgary. Western Canada is a major driver of our national economy and together we will have the scale, expertise and commitment to deliver the technology infrastructure needed to keep local communities connected, businesses competitive and attract new investment...We are at a critical inflection point where generational investments are needed to make Canada-wide 5G a reality."

Shaw Communications' Executive Chair & CEO Brad Shaw remarked, "Our two companies have been successful because of the foresight and vision of two great founders who were driven by their unrelenting pioneering spirit and entrepreneurial values...While unlocking tremendous shareholder value, combining these two great companies also creates a truly national provider with the capacity to invest greater resources expeditiously to build the wireline and wireless networks that all Canadians need for the long term."

Rogers Communications' Chairman Edward Rogers added, "Today's announcement brings two iconic Canadian family-founded businesses together with the expertise, combined assets, and scale to deliver the next generation of telecommunications to Canadian consumers and businesses."

The companies pointed out that the added investment in broadband and wireless network infrastructure will also create up to 3,000 net new jobs and expand operations greatly in Canada's four Western provinces.

The firms noted that "Brad Shaw, and another Director to be nominated by the Shaw family, will be named to the Rogers Board of Directors to assist in driving the future success of the combined company, following the completion and approval of the transaction."

Under the terms of the transaction Rogers have agreed to pay Shaw's Class A and Class B Shareholders $40.50 per share in cash. The agreement specifies though that the Shaw Family Living Trust, which is Shaw's controlling shareholder along with certain members of the Shaw family, will receive 60% of the consideration for their shares in the form of 23.6 million Class B Shares of Rogers with the remaining 40% balance to be paid in cash.

The report noted that the transaction requires approval by two thirds of the votes cast by the holders of Shaw's Class A Shares and Class B Shares. The Shaw Family Living Trust has already irrevocably agreed to vote its entire Class A Shares (79% of all outstanding Class A shares) and Class B Shares in favor of the deal. The firms noted that the transaction is expected to close in H1/22 subject to customary closing conditions as well as significant court, regulatory and stock exchange approvals.

Rogers Communications is a diversified media and communications company that provides cable TV, telephone, Internet, information technology (IT) and wireless communications services to consumers and businesses across Canada. The firm operates across three main business segments including Wireless telecommunications; Cable which includes CATV, internet, and telephone services; and the Media segment that operates media properties in the areas of sports, entertainment, multi-platform shopping, digital media and publishing.

Shaw Communications is a large communications firm that provides wireline, broadband internet, WiFi and digital data, phone and video services to residential and business customers. The company has built and deployed its extensive Fiber+ and Fast LTE networks, which it claims is one of the most advanced hybrid fiber-coaxial networks in North America. The firm also offers residential wireline services in Alberta, British Columbia, Manitoba, Northern Ontario and Saskatchewan. The company together with Freedom Mobile provides a reliable wireless network serving each company's respective customers in Alberta, British Columbia and to Freedom Mobile customers in Ontario. The firm additionally owns and operates Shaw Direct, one of two licensed satellite video services available in Canada.

Shaw Communications started off the day with a market cap of around US$9.3 billion with approximately 484.4 million shares outstanding and a short interest of about 0.40%. SJR shares opened 45% higher today at $27.85 (+$8.68, +45.28%) over Friday's $19.17 closing price and reached a new 52-week high price this morning of $28.05. The stock has traded today between $25.25 to $28.05 per share and is currently trading at $27.27 (+$8.10, +42.25%).


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