A battle for control of the Rogers Communication Inc. (RCI) board began in a Canadian court on Monday, with attorneys for former chairman Edward Rogers arguing that he had the authority to appoint a new board without an in-person shareholder meeting.
Attorney Ken McEwan told British Columbia Supreme Court Justice Shelley Fitzpatrick that Edward Rogers needed a 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 right to act, McEwan said.
Rogers Communications is embroiled in a messy boardroom fight when a feud in the founding family erupts into the open, weighing on the stock and raising doubts about the fate of a multi-billion dollar acquisition.
Controversy erupted within the wireless, telecommunications and cable TV provider after Edward Rogers, son of the late founder Ted Rogers, failed in his attempt to oust chief executive Joe Natale in September, claiming that he had failed after the merger. He had lost faith in Natale’s ability to lead the unit. The planned C$20 billion ($16.14 billion) acquisition of Shaw Communications is complete.
Edward Rogers retaliated by using his position as chairman of the family-owned Rogers Control Trust, the entity that owns the majority of the voting shares in the company, to form a new board, which saw him serve as chairman. recognized as.
He then approached the Supreme Court of British Columbia, where the company is incorporated, to legitimize the new board.
Judge Fitzpatrick asked McEwan whether there should have been a meeting before the Edward Rogers family trust could act. McEwan said that Edward Rogers had enough shareholders such that a meeting was not necessary.
Stephen Schachter, a lawyer representing RCI, said the company’s rules require an in-person meeting to dismiss board members and refill their seats.
Edward’s move landed him in trouble with his mother and two sisters, who supported Natale, and resulted in his removal as president of Rogers.
Public family disputes are a rare occurrence in Canada and have taken analysts and investors by surprise. Analysts warn that boardroom drama is a distraction in the midst of Rogers’ biggest acquisition. Shaw reiterated his support for the deal last week.
“Shaw shareholders could get cold feet and walk out of the deal,” said Keith Snyder, an analyst at CFRA Research. If it pans out, he said, it would give competitors like BCE Inc. or Telus Corp. a chance to bid. Company.
Shaw’s stock closed Monday at C$35.47, lower than Rogers’ offer price of C$40.50, a sign that some market players are skeptical about the deal’s success.
In his affidavit, Edward Rogers stated that the board agreed to replace Natale as CEO. But the family patriarch Loretta Rogers said that her decision to initially support Edward was based on inaccurate and incomplete information provided by her son, and she changed her mind upon learning additional facts and continued to support Natale. .
John MacDonald, who was named as Rogers’ chairman after Edward’s exit, stated in his affidavit that the board and family members did not vote to eliminate Natale, and instead believed was that he “exceeded his goals” as CEO.
Matthew Dolgin, an analyst at Morningstar, believes a solution cannot be expected anytime soon. The events have weighed on Rogers’ stock, which is down 1.4% this year, with a 17.9% rally in BCE and a 12.67% gain in Telus.
“Usually we would more easily dismiss the actions and wishes of an ousted chairman, but the complexity of the family’s control of the firm makes it anything but cut and dry,” Dolgin said.
RCI operates under a unique ownership structure, in which around 10 of the late founder’s people, including his four children and widow, and several longtime family friends, sit on the Rogers Control Trust’s advisory committee. The Trust holds 97.5% Class A voting shares in RCI.
($1 = 1.2392 Canadian Dollar)
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