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Rogers, Quebecor Rise Most Since 2020 After Sealing Mobile Deal

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(Bloomberg) -- Shares of Quebecor Inc. and Rogers Communications Inc. jumped the most since 2020 after the companies reached a deal that would see Quebecor acquire wireless assets in Ontario and Western Canada.

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Quebecor agreed to pay C$2.85 billion ($2.2 billion) for Shaw Communications Inc.’s Freedom Mobile division, the companies announced on Friday night. It’s a side deal that’s designed to resolve antitrust concerns that are holding up Rogers’ C$20 billion acquisition of Shaw.

Quebecor rose 5.8% in Toronto, the biggest one-day increase since March 2020. Rogers was up 5.9% and Shaw soared 7.8% to C$37.34. he Rogers takeover offer is C$40.50 per Shaw share.

Quebecor is getting Freedom Mobile -- Canada’s fourth-largest wireless provider -- at a reasonable price as its two rivals were forced to divest it, according to analysts.

The headline figure for Freedom is below the consensus C$3 billion to C$4 billion value of Shaw’s wireless assets, according to Tim Casey, an analyst at BMO Capital Markets. The Quebecor deal includes most, but not quite all, of Shaw’s wireless assets: Rogers is trying to keep a small number of customers who are Shaw cable and internet consumers and also have phones under the Shaw Mobile brand.

‘Biting the Bullet’

Rogers’ plan to acquire Shaw hit a regulatory roadblock in May after Canada’s Competition Bureau sued to stop the deal, citing anti-competitive concerns in the wireless business, where the companies’ operations overlap. Rogers and Shaw were already looking for a buyer for Freedom Mobile at the time. That’s when Quebecor stepped in.

The deal with the Montreal-based communications firm may check the boxes the bureau is looking for, according to some analysts.

Competition in the sector would increase because Quebecor would scale up Freedom Mobile’s operations after the deal closes, said Jerome Dubreuil, a telecommunications analyst at Desjardins Securities Inc. That would also keep Freedom a viable competitor in key markets like Toronto and Vancouver.

“Quebecor gets an attractive deal,” Dubreuil said in a note to investors. “Rogers is biting the bullet and making the right moves to increase the odds of gaining regulatory approval for its merger. Meanwhile, Quebecor is picking a ripe fruit and extending its growth runway with its core competencies for a reasonable price.”

The question now is whether Rogers and Shaw can persuade the antitrust body and the federal government to accept the Quebecor solution, preventing a protracted hearing at the Competition Tribunal, Canada’s merger court. The parties are expected to work through a negotiated settlement this summer, with the deal closing in July or August, said Adam Shine, an analyst at National Bank Financial.

(Updates share prices)

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