Rogers released its annual financial report yesterday, in which it painted a happy future together with Shaw. But the report also detailed the colossal sums Rogers incurred following the many deferred deadlines, as well as what it risks if the C$26 billion merger deal is not completed by the deadline of Mar. 31, 2023.
But earlier this year, Rogers announced robust Q4 earnings, with a 25 per cent jump in its net income, and predicted decent growth in its earnings guidance.
That, Tony Staffieri, chief executive officer (CEO) of Rogers said, was achieved, “against the backdrop of a lingering pandemic, a new executive team, one of the largest proposed mergers in Canadian history, and an unprecedented network outage.”
The telco giant also boasted of its record investment of C$3.1 billion in capital, including C$2.6 billion in technology and networks, and a free cash flow of C$2 billion, excluding financing from Shaw.
The merger with Shaw and its many trials and successes were also detailed but the report envisioned a happy ending to which Industry minister François-Philippe Champagne holds the key.
“Rogers, together with Shaw, would become one strong, national cable, media, and wireless company,” Staffieri stated. “Together, with our scale and breadth of assets, it would allow us to add more value for our customers by bundling our services and offering faster, more reliable networks in more places. We look forward to closing this transformative merger and delivering its many benefits to our customers, our communities, and our country.”
The deadline to close the transaction has had to be deferred twice, as Champagne maintained he is in no rush to render a verdict on the transfer of Shaw’s spectrum licenses to Vidéotron, the pre-conditional side divestiture on which the completion of merger depends.
Staffieri said at Scotiabank’s TMT conference Tuesday, as reported by cartt.ca, that “the time has allowed us to solidify our integration plans,” adding that Rogers is entering the transaction from a stronger position than it would have been 16 months ago.
However, Rogers has repeatedly flagged significant risks of financial penalties and lawsuits from investors as a result of the time taken by Champagne to render a verdict and the subsequent extended deadlines.
Rogers also disclosed in its report that if the Shaw transaction is not completed by the newest deadline of Mar. 31, 2023, either Rogers or Shaw may terminate the merger.
The company notably complained about the following potential consequences:
- Pay a reverse termination fee of C$1.2 billion if the Shaw transaction is not completed
- Pay legal, accounting, tax and financing-related fees, whether or not the merger is completed
- The company’s share price, future financial performance, and relationships with employees, suppliers, vendors, retailers, customers and more will be negatively affected
- Upon closing, the company will have to pay up to C$40 billion of consolidated debt issued since the beginning of the transaction.
- Downgrade in credit ratings given outstanding debt and higher borrowing costs in the future
The report added; “Even if we successfully integrate Shaw’s businesses, the anticipated benefits of the Shaw Transaction may not be fully realized, or they could take longer to realize than expected.”
Rogers highlighted the total payment of C$819 million made to the holders of special mandatory redemption (SMR) notes as consent to extend the SMR date from Dec.31 2022 (initial closing date of the merger) to Dec. 31 2023. The consent ensures financing remains in place even if the deadline is not met.
It also pointed out it had paid C$27.2 million to the CRTC following its approval of the merger in March 2022. The contribution was made in support of the broadcasting system, through various initiatives including supporting local news, Indigenous producers, hiring more journalists at CityTV, and more.
