A battle for control of Rogers Communication Inc’s (RCI) board wrapped up in a Canadian court on Monday as lawyers for former chairman Edward Rogers said he had the authority to appoint a new board without an in-person shareholder meeting, while company lawyers argued due processes were not followed.
RCI, Canada’s largest wireless carrier, is embroiled in a 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 judge has set Nov. 5 to decide on the validity of the new board.
The dispute was triggered after Edward Rogers, son of late founder Ted Rogers, tried to remove Chief Executive Joe Natale in September, saying he had lost confidence in the CEO’s ability to lead the merged entity after the planned C$20 billion ($16.1 billion) takeover of Shaw Communications goes through.
That put Edward Rogers at odds with his mother and two sisters, who backed Natale, and resulted in his removal as the company chair. Edward Rogers used his position as chair of the family-owned Rogers Control Trust, the entity that owns the majority of voting shares in the company, to name a new board, which recognized him as chairman.
He then approached the court in British Columbia, where the company is incorporated, to legitimize the new board.
RCI lawyer David Conklin told British Columbia Supreme Court Justice Shelley Fitzpatrick that the late founder foresaw a stalemate between the family trust and the board of directors, and specifically requested a public meeting to resolve it.
Conklin argued the former chair did not give shareholders an opportunity to respond to his plan to remove and appoint new board members, violating the company’s own governance practices.
Lawyer Ken McEwan, arguing for Edward Rogers, said the former chair 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.
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, said company rules require an in-person meeting to dismiss board members and refill their seats.
Schachter said Edward “cannot thumb his nose” at due process.
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 stock closed on Monday at C$35.47, compared with Rogers’ offer price of C$40.50, which is a sign that some market players have doubts about the success of 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.
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.
($1 = 1.2392 Canadian dollars)
Read all the Latest News, Breaking News and Coronavirus News here. Follow us on Facebook, Twitter and Telegram.
For all the latest Technology News Click Here
