Advisory fee pot for law firms, bankers, and advisers among the largest in Canadian M&A History
Rogers Communications Inc.’s $26-billion takeover of Shaw Communications Inc. cleared the final regulatory hurdle Friday, more than two years after the deal was first announced.
And as the deal and related transactions get set to close in the coming days, bankers, lawyers and shareholder advisers will be sharing in at least $100-milion plus in fees from a deal that Canada’s Competition Bureau and some members of the Rogers family bitterly contested.
The transaction involves one of the largest fee packages in Canadian M&A history. Rogers and Shaw estimated in April 2021 that the transaction would cost $ 100 million in total fees. However, that number could go higher and favour law firms, thanks to the lengthy court battles and family drama involved.
While fixed fees can be negotiated as part of a law firm’s involvement in a transaction, it would be less likely on deals with a lot of legal uncertainty.
Law firms Lax O’Sullivan Lisus Gottlieb represented Rogers, while Davies Ward Phillips & Vineberg are lawyers for Shaw. Goodmans LLP and Torys LLP advised Rogers and its controlling shareholder, while Davies Ward Phillips & Vineberg and New York-based Wachtell Lipton Rosen & Katz represented Shaw. Burnet, Duckworth and Palmer represented Shaw’s special committee of independent directors as an independent legal adviser.
Lax O’Sullivan partner Jon Lisus could not be reached for comment, and Davies representatives said the firm couldn’t comment until the deal closed.
Rogers’s first legal adviser, Fasken Martineau DuMoulin LLP, was replaced by Goodmans in late October 2021, as Rogers was amid a court battle between family members. At the time, the firms declined to comment on the switch.
That same fall, court filings indicate that three members of the Rogers family – Loretta Rogers, widow of founder Ted, and two of her daughters, Melinda and Martha – pointed to perceived conflicts at Torys.
Torys, where Ted Rogers articled in the 1960s before he moved into cable and radio, looked after the Rogers’ family affairs for decades. The firm has worked for the Rogers Control Trust, which controls the vast majority of the company’s voting shares. Ted and Lorretta’s son Edward is the chair of the trust.
Loretta Rogers and daughters Melinda and Martha wanted to drop Torys. Court records show that in an e-mail, Martha Rogers told Torys partner Richard Willoughby: “You’ve lost the legal capacity to act due to your conflicts of interest and blatant lack of independence.”
Court filings also indicate Willoughby responded to all three women by explaining the firm would continue to counsel the “balance of members” of the Rogers trust while those with different interests should consider hiring their own lawyers regarding any disputes. That is when Edward Rogers hired boutique law firms Lax O’Sullivan Lisus Gottlieb LLP in Toronto and Vancouver-based McEwan Cooper Dennis LLP.
The hiring of Goodmans triggered another legal challenge in the fall of 2021, as lawyers for Edward flagged a potential conflict. In court filings, they pointed out Goodmans represented both the company and chief executive Joe Natale, whom Edward Rogers unsuccessfully attempted to fire, setting off a bitter feud. Goodmans responded that both the CEO and the company signed off on the firm as Fasken’s replacement, eliminating the issue.
In approving the overall Rogers-Shaw transaction, federal Industry Minister Francois-Philippe Champagne also approved the transfer of Shaw-owned Freedom Mobile’s wireless licences to Quebecor Inc.’s Videotron, which operates in Quebec and some border regions of Ontario., paving the way for the deal completion.
Given the family disputes and the regulatory hurdles, it’s taken a long time to have the transaction. Rogers announced its friendly deal to buy Shaw in March 2021. Since then, the deadline to close it has been pushed back numerous times. The three companies said Friday they expected to complete the transaction by April 7.
Champagne said Ottawa has secured 21 “legally enforceable commitments” from Rogers and Videotron to bolster competition in the sector in a move that could “actually drive down prices.” He said the commitments would ensure a fourth national player that could go up against the Big Three carriers – an enlarged Rogers, TELUS and Bell.
Rogers and Shaw had agreed in June 2022 to sell Freedom Mobile to Videotron for $2.85 billion to ease competition concerns raised by the original proposal.
Champagne had stipulated he would “expect to see” Freedom’s wireless prices in Ontario and Western Canada lowered by about 20 percent, in line with Videotron’s current Quebec offerings. Videotron agreed to accept the conditions in a revised deal.
The conditions include Rogers establishing a second headquarters in Calgary and adding 3,000 new jobs based in Western Canada “in the coming months,” which it must maintain for at least ten years.
It must also spend $5.5 billion to expand 5G coverage and additional network services and a further $1 billion to connect rural, remote, and Indigenous communities.
Videotron must offer plans at least 20 percent lower than its competitors and spend $150 million over the next two years to upgrade Freedom Mobile’s network. It is restricted from transferring any Freedom Mobile licences for a decade.
The minister also announced his department would review Canada’s spectrum transfer framework, noting one has not been conducted in nearly a decade.
Champagne vowed to “be like a hawk on behalf of Canadians” to ensure the companies adhere to the conditions.
“Make no mistake. We will be monitoring their performance under these terms and conditions and making sure that we enforce the terms of these contracts on behalf of Canadians,” he said.
Asked how he would enforce the conditions, the minister told reporters, “I’m a lawyer, and it’s a contract,” before adding that the deal is subject to arbitration.
“I would not mess with the regulator,” he said. “It’s never a good thing, not only if you have a contract with conditions, but on top of that, just think about the penalties.”
The minister said that if Rogers breaches its conditions, it must pay $1 billion in damages. Videotron would be subject to $200 million if it fails to meet its commitments.
“If Canadians do not begin to see a clear and meaningful reduction in prices within a reasonable amount of time, I will have no choice but to seek further legislative and regulatory powers to drive down prices in Canada,” Champagne said.
In January, the Federal Court of Appeal rejected the Competition Bureau’s bid to quash the deal.
The regulator, which had argued that approving the merger would reduce competition and result in higher cellphone bills, poorer service, and fewer options for consumers, had hoped the higher court would overturn a previous ruling from the Competition Tribunal in favour of the pact.
Instead, the court sided with the tribunal’s view that “there was no substantial lessening of competition” at risk by approving the deal.
The companies had previously tried to solve the impasse with the Competition Bureau via mediation through last summer and fall, but that process was unsuccessful. Rogers and Shaw had agreed not to close their deal until either reaching a negotiated agreement with the regulator or a ruling from the Competition Tribunal.
Clearing another regulatory obstacle, the Canadian Radio-television and Telecommunications Commission (CRTC) approved Rogers’ acquisition of Shaw’s broadcasting services in March 2022, subject to certain conditions. Getting that approval included a requirement for Rogers to contribute $27.2 million to various initiatives and funds, five times what the company had initially proposed.
The CRTC, tasked with assessing broadcasting elements of the transaction, said 80 percent of that sum must go to the Canada Media Fund, the Independent Local News Fund and certified independent production funds.
Rogers must also create an Indigenous news team with journalists in all provinces where the company provides news content to deliver stories to First Nations, Metis and Inuit communities.
As part of the agreement, Rogers will acquire 16 cable services based in Western Canada, a national satellite television service and other broadcast and television services.
Earlier this month, Champagne told reporters, “I’m the holdup” when asked about the agreement’s constantly shifting deadline.
“My mission has been that this undertaking is to drive down prices. That’s the only thing that was the driving force behind it. That’s why it took so long,” he said Friday.
He told reporters that the Liberal government has “changed the game” for telecommunications companies in Canada but promised, “this is not the end of it.”
“If we don’t see prices coming down ... I’ll be seeking additional power to make sure that we drive down prices, and at that time, everything is on the table,” he said.
With files from Canadian Press
