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(Bloomberg) To finance its $16 billion acquisition of a smaller rival, Rogers Communications Inc. plans to boost its debt load to a level so high that weaker companies would be at risk of being cut to junk. It’s a high-stakes wager that the Canadian telecom company will be able to cut costs and pay down its borrowings quickly after its takeover of Shaw Communications Inc.
The company is counting on demand for credit to remain strong after Verizon Communications Inc. sold $25 billion of bonds to help finance purchases of 5G airwaves last week. The debt sale, which tied for the sixth largest U.S. high-grade securities offering ever, garnered $109 billion in demand at the peak.
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Shaw Communications Inc. Class B shares traded well below the $40.50-per-share takeover offer made by Rogers Communications Inc. on Monday, in a sign that investors are concerned regulatory scrutiny could get in the way of the deal.
Shaw Class B non-voting shares closed at $33.85 in Toronto – up 41.6 per cent for the day, but $6.65 short of the offer price. However, Shaw Class A voting shares, largely owned by the Shaw family, who have agreed to the deal, traded closer to the takeover price and closed at $38.26, while Rogers Class B shares rose 3.4 per cent to $61.57.
Rogers signs agreement to acquire Shaw Communications in deal valued at $26 billion
The acquisition is subject to regulatory approval
Toronto-based national carrier Rogers has signed a deal to purchase Shaw Communications in a transaction valued at $26 billion.
The carrier says the acquisition will build on the legacy of two family-founded Canadian companies and that together, they will have the capability to deliver unprecedented wireline and wireless broadband and network investments.
Rogers has stated that it will not increase wireless prices for Freedom Mobile customers for at least three years following the close of the transaction.
âWithout a doubt, my father would be proud of this moment, combining forces with the company founded by his old friend to deliver more Canadians world class connectivity, more choice, and better value,â said Shaw Communications CEO Brad Shaw in a press release.
Rogers Communications Inc. is set to to acquire rival Canadian cable giant Shaw Communications Inc. in a $16 billion deal (C$20 billion), the companies said Monday. If approved, the merger would unite the country's two largest cable providers. Per the companies, the C$40.50-per-share cash offer transaction is not conditional upon financing and has the support of Shaw's board. The Shaw family will become one of the largest shareholders in Rogers.
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