BMO's CaseyOctober 25, 2021 | 12:30 ET | 12:30 ET~ Rogers Comm. RCI.B-TSX RCI-NYSE Rating Outperform Price: Oct-22 $60.02 Target ↓ $68.00 Total Rtn 17% Minority Shareholders Need Closure Not Chaos Bottom Line: Despite all the unprecedented drama and confusion, we are maintaining our Outperform rating on RCI as we believe both the Rogers and Shaw families, and their companies, remain committed to the transaction. In our view, they both need the deal, it makes compelling industrial logic, and the pro forma cash flow profile of the combined entities suggest value in RCI at current trading prices. We think Edward Rogers will ultimately prevail in terms of control at RCI, but the timing to clarity is unclear given litigation. Key Points Despite the utter confusion regarding control and management at Rogers, we believe both corporate entities, and both families, are committed to closing the transaction. Both are highly motivated to see it through: Shaw cannot generate an adequate return in wireless, even before 5G, and Rogers needs the Shaw fibre footprint for 5G in western Canada. We think Edward Rogers will retain control of the family trust, and therefore the company. Our view is underpinned by the fact that he has the support of Alan Horn and Phil Lind, two very influential directors on both Boards. Given contradictory statements overnight from various parties (the company, Edward Rogers and other family members), the issue of control is headed to the courts. It is also unclear whether Edward requires a shareholder vote to effect control or if it can be done by written memorandum. Timing to resolution is unclear. We expect Rogers will request a delay in the CRTC hearing, which is slated to begin November 22. Our base case assumption has been that the Shaw transaction would close in Q2/22. A closing date in H2/22 seems reasonable now. Given our view that Edward Rogers will ultimately prevail, there will almost certainly be management changes at Rogers. Minority shareholders need closure on the governance and management issues as quickly as possible. We expect the shares will underperform until there is clarity on the foregoing, which will provide line of sight to the Shaw transaction. In the meantime, as evidenced by an encouraging Q3 print last week, we expect the reported metrics will improve in the near term as the economy reopens and consumer travel restarts. Given the near-term uncertainty, we are lowering our one-year target price from $72 to $68, which reflects 8x 2022E EBITDA