A battle for control of Rogers Communication Inc (RCI) board opened in Canadian court on Monday with a lawyer for former chairman Edward Rogers arguing he had the authority to appoint a new board without an in-person shareholder meeting.
Lawyer Ken McEwan told a British Columbia Supreme Court Justice Shelley Fitzpatrick that Edward Rogers required the majority of shareholder votes to reconstitute the company’s board of directors. As chairman of the family trust, he controlled 97.5% of the voting shares, giving him the authority to act, McEwan added.
Rogers Communications is embroiled in a messy boardroom battle after a feud in the founding family erupted into the open, weighing on the stock and raising doubts about the fate of a multibillion-dollar takeover.
The dispute within the wireless, telecom and cable TV provider was triggered after Edward Rogers, son of late founder Ted Rogers, failed in his attempt to remove Chief Executive Joe Natale in September, claiming he lost confidence in Natale’s ability to lead the merged entity after the planned C$20 billion ($16.14 billion) takeover of Shaw Communications goes through.
Edward Rogers retaliated using his position as chair of the family-owned Rogers Control Trust, the entity that owns the majority of voting shares in the company, to constitute a new board, which recognized him as chairman.
He then approached the Supreme Court of British Columbia, where the company is incorporated, to legitimize the new board.
Judge Fitzpatrick questioned McEwan about whether a meeting should have taken place before Edward Rogers could act on behalf of the family trust. McEwan said Edward Rogers had sufficient shareholders such that a meeting was not necessary.
Stephen Schachter, a lawyer representing RCI, countered that company rules require an in-person meeting to dismiss board members and refill their seats.
Edward’s move put him at odds with his mother and two sisters, who backed Natale, and resulted in his removal as the chairman of Rogers.
The family row playing out in public is a rare occurrence in Canada and has caught analysts and investors by surprise. The boardroom drama in the middle of Rogers’ biggest takeover is a distraction, analysts have warned. Shaw last week reiterated its support for the deal.
“Shaw shareholders could get cold feet and pull out of the deal,” said Keith Snyder, an analyst at CFRA Research. If it pulls out, he added, that would give competitors like BCE Inc or Telus Corp a chance to make a bid for the company.
Shaw stock closed on Monday at C$35.47, a discount to Rogers’ offer price of C$40.50, which is a sign that some market players have doubts about the success of the deal.
In his affidavit, Edward Rogers said the board agreed to replace Natale as CEO. But Loretta Rogers, the family’s matriarch, said her decision to initially support Edward was based on wrong and incomplete information provided by her son, and that she changed her view on learning additional facts and continues to back Natale.
John MacDonald, who was named Rogers’ chairman after Edward’s exit, said in his affidavit the board and family members had not voted to terminate Natale, and that instead they believed he had “exceeded his goals” as CEO.
Matthew Dolgin, an analyst at Morningstar, believes a resolution cannot be expected soon. The events have weighed on Rogers’ stock, which is down 1.4% this year, compared with a 17.9% rally in BCE and a 12.67% gain in Telus.
“Normally we’d more readily dismiss the actions and desires of an ousted chairman, but the complexity of the firm’s family control makes it anything but cut-and-dried,” Dolgin said.
RCI operates under a unique ownership structure wherein 10 people close to the late founder, including his four children and widow, and several longtime family friends, sit on the Advisory Committee of the Rogers Control Trust. The trust owns 97.5% of Class A voting shares in RCI.
($1 = 1.2392 Canadian dollars)
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