TORONTO – Mobilicity has accepted, and Industry Canada, the Ontario Superior Court and late Wednesday the Competition Bureau, have blessed, Rogers’ proposal to acquire 100% of Mobilicity’s ownership for $465 million, the communications giant confirmed Wednesday morning.
The announcement also said Rogers will buy Shaw's unused AWS-1 spectrum for $100 million, in addition to the down payments made when an option agreement was originally announced in January 2013, and will then divest some of that spectrum to Wind Mobile. Specifically, Rogers and Wind will undertake an AWS-1 spectrum swap in Southern Ontario to create contiguous spectrum for Rogers, and Rogers will also divest certain non-contiguous AWS-1 spectrum to Wind in BC, Alberta, Saskatchewan, Manitoba and Northern Ontario and Eastern Ontario.
The acquisition was approved by Justice Frank Newbould of the Ontario Superior Court of Justice on Wednesday. Some minor court approvals remain, a Rogers Communications spokesperson said, but with Competition Bureau approval in hand, the deal is now all but done.
Rogers said that the transactions means that it is gaining "significant", previously unused spectrum capacity that works with all LTE devices today. "We believe this is a good deal for Rogers. It enhances its spectrum position at a very attractive price and with seamless integration. That said, we don't view this as a game changer in terms of competitive balance in the industry," said BMO analyst Tim Casey in a note to clients on Wednesday.
"We're basically adding multiple lanes on our wireless highway in three key markets overnight. This means faster speeds and better quality for our customers as they use more and more mobile video”, said Rogers Communications president and CEO Guy Laurence, in the announcement. “We got the spectrum we needed where we needed it for our customers and this keeps Rogers in the leading competitive position across the country."
"The transaction with Rogers provides the best possible outcome for Mobilicity's customers, dealers and employees," added Mobilicity president Anthony Booth. "Rogers ensures certainty of service for Mobilicity customers, provides a great network, national coverage and high quality products and services. At the same time, Mobilicity employees will have the opportunity to work at a great Canadian company in Rogers."
In a separate announcement, Mobilicity called the deal the "best available way to realize value for Mobilicity's stakeholders", and added that the purchase price will be applied to repay all of the company's outstanding first and second lien debt, with the remainder being used to repay certain remaining unsecured creditors on a pro rata basis.
"I'm pleased that, following a robust sale and bidding process, we were able to agree on a purchase price to complete a going-concern sale that addresses the needs of a number of stakeholders," said chief restructuring officer William Aziz, in that announcement. "I thank subscribers, employees, dealers, suppliers and creditors for their continued support of Mobilicity throughout the restructuring process."
"Probably the best strategic move (that Rogers' Laurence) has made since joining the company." – Jeff Fan Scotiabank
Rogers said that the transaction with Mobilicity is supported and was facilitated by The Catalyst Capital Group Inc., on behalf of investment funds managed by it, working closely with Rogers on the structuring of the transaction. It is subject to working capital adjustments.
The $440 million purchase price is offset by tax losses valued at approximately $175 million which Rogers will acquire.
In a note to investors, Scotiabank analyst Jeff Fan called the deal "probably the best strategic move (that Rogers' Laurence) has made since joining the company", noting the accompanying tax losses and additional, well-priced sprectrum that will allow it to offer subscribers more speed and capacity.
He also described the move as a "good compromise for the industry".
"Wind gets free spectrum and (Industry Canada) ensures that Wind has the assets (at low cost) to be a sustainable fourth operator”, he wrote in a client note. “(Shaw) completes its $300M spectrum sale to RCI. The transactions have established a precedent that set-aside licenses can be owned by incumbents, which is good news for QBR (Quebecor) and Wind. This is good for BCE and Telus as well in getting a 'free ride'.”
Fan added that the newly widened valuation gap between Quebecor and Wind will make it more difficult for the two to partner, and that he expects that Quebecor “will likely turn its attention to buying back CDP’s interest in Quebecor Media, which would be positive for QBR’s valuation”.
"This is good news for Shaw, as it will receive the remaining $100 million from Rogers for spectrum, and it doesn't have to return any of the $200 million deposit," added TD Securities analyst Vince Valentini in an investor's note. "Given the option was set to expire at the end of June 2015 we believe few on the Street were expecting the
final $100 million."
