Why Shaw Stock Still Looks Like a Buy Ahead of Its Takeover

Here’s why I’d suggest investors looking for an arbitrage play consider Shaw Communications (TSX:SJR.B)(NYSE:SJR) and Shaw stock today.

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Among the sectors investors look for growth right now, 5G stocks tend to be high up on the list. Accordingly, telecom plays such as Shaw Communications (TSX:SJR.B)(NYSE:SJR) and Shaw stock have garnered a lot of attention of late.

Now, Shaw is currently in the process of being acquired by Rogers Communications (TSX:RCI.B)(NYSE:RCI). This move certainly changes the calculus for investors considering Shaw on the basis of its 5G implementation. That’s because many of the company’s wireless assets are expected to be spun off, as a regulatory requirement for the deal to go through.

There’s also some question of whether regulators will ultimately approve this deal. This has led to some investors simply steering clear of this stock until the dust settles.

That said, there are reasons why investors may want to consider Shaw stock prior to the merger going through. Here are two key reasons why Shaw is one indirect 5G play that’s on my radar right now.

Prospects for Shaw stock look bright ahead of merger

Expectations are that this merger is moving ahead as expected. Indeed, Canadian regulators have proven to be favourable to deals in the past. And most analysts know what to expect in terms of the spin-offs and divestitures that will make this deal happen.

Accordingly, there’s a relatively high likelihood of this deal going through — that is, considering the relatively limited arbitrage opportunity Shaw shares provide today.

That said, there is a meaningful valuation gap between where Shaw stock trades and where the ultimate offer price is. Accordingly, investors who are patient and able to wait for this deal to close could pocket a decent double-digit annualized gain to wait.

I’m bullish on this deal ultimately going through, and view Shaw stock as a unique arbitrage play in this regard.

Bottom line

I think the fact that Shaw has been targeted for an acquisition is a bullish sign for telecom investors, generally. Indeed, the consolidation this deal provides should result in Rogers being able to eat away at some of the market share of its peers. Rogers is a highly diversified telecom player with large investments in the sports business. However, those looking to invest in this sector who want a truly national player will note that this deal provides Rogers with greater coast-to-coast coverage.

Accordingly, I think owning Shaw stock or Rogers stock in this environment is a solid bet. Both companies are well-positioned competitively. And right now, Shaw stock provides some rather lucrative arbitrage-based upside.

Accordingly, I still think there’s an investment thesis with Shaw today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV.

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