‘Extremely difficult’ to sell to Rogers, Brad Shaw tells Tribunal

Shaw Communications Inc. CEO Brad Shaw told the Competition Tribunal Wednesday that it was an “extremely difficult” decision to sell his family company to Rogers Communications Inc. but the deal was necessary on many levels. The Tribunal is hearing a complaint from the Competition Bureau over the proposed merger. The western telecom was being outspent by Telus Corp., he said. Shaw invested $5 billion in wireless infrastructure and has not turned a profit yet. “We don’t have the scale and size to make investments to truly innovate to truly give customers the services and products they want,” the CEO said. “So thus we made the decision to sell.” Asked why he chose to sell to a strategic partner rather than a financial buyer such as a hedge fund, Shaw said he was looking to invest in the long term. Rogers offered expertise in telecom, had experience with 5G networks and operates a retail operation. He said the company has made great strides since it was founded by his father, JR Shaw, in 1972. “We’re an owner but we’re an operator,” he said of the eponymous company. “So we take pride in what we've done, what we’ve been able to build over those 50 years.” Hiving off the Freedom Mobile subsidiary to Quebecor Inc.’s Videotron also made sense, Shaw maintained. Videotron is an experienced player in the Quebec market and also has a 5G presence. The firm is more than capable of competing on a larger scale, he added. He admitted to Bureau lawyer Alexander Gay that regular shareholders will receive $40.50 per share when the takeover by Rogers is complete. Shaw family shareholders will receive $16.20 in cash and point four shares in Rogers for each Shaw share. The family holds 50 million shares, Gay said, with a family trust holding nearly 6 million additional shares. That works out to a windfall of $1 billion in cash and 23 million in Rogers shares. Those shares are worth $1.3 billion. Gay suggested Brad Shaw was motivated by family benefits. The CEO rejected that idea, saying the deal will benefit employees, all shareholders and customers. Brad Shaw was preceded by company president Paul McAleese. After speaking for about 15 minutes about 5G rollout, the president went into in camera testimony for several hours. The two executives were followed by principal strategist Don Annett who was questioned about underserved areas, parts of the country that do not have internet download speeds of 50 megabits per second and 10 Mbps upload. Following the Shaw corporate testimony, Rogers appeared. Its first witness was Dean Prevost, president of integration for the Toronto-based telecom. The 20-year telecom veteran has worked at several companies that were involved in mergers. He told Rogers attorney Crawford Smith it is not necessary to own fibre networks to be successful in wireless telecommunications. “Bell, Telus and ourselves have all been successful in markets where we don’t have a wireline set of assets,” Prevost responded. Bureau lawyer Paul Klipperstein had just begun his cross-examination of the Rogers executive when panelist Wiktor Askanas reported that an alarm had sounded in the building and people had been asked to evacuate. The hearing was adjourned about 20 minutes earlier than usual. In Tuesday's questioning of Shaw executive vice president and chief financial officer Trevor English, Competition Bureau lawyers sought to illustrate the amount of money Shaw executives are set to receive if the Rogers acquisition goes through. English himself is set to receive just under $12.9 million in benefits if the sale goes through, while Brad Shaw will receive over $10.1 million, and Shaw president Paul McAleese will net some $12.7 million. In evidence from Shaw's quarterly earnings calls and reports, Bureau lawyers also sought to portray that Shaw was not in a level of financial distress that would have required them to be sold, pointing to remarks on calls with analysts from McAleese, in which the Shaw president and former wireless president said that he was "optimistic and bullish" on Shaw's 5G potential, and other comments from executives that the company had an "attractive" free cash flow profile. English replied that when isolated, the company's wireless profile was worse than that. "We were concerned about … future capital required within the business to compete more effectively," English said. –Reporting by Paul Park at ppark@thewirereport.ca with files from Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Michael Lee-Murphy

‘Extremely difficult’ to sell to Rogers, Brad Shaw tells Tribunal

News | November 24, 2022

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‘Extremely difficult’ to sell to Rogers, Brad Shaw tells Tribunal

News | November 24, 2022

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