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Rogers Communications reinstates ousted chair after court backs his bid to shakeup board

Stock MarketsNov 05, 2021 09:36PM ET
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2/2 © Reuters. FILE PHOTO: General view of the Rogers Building, quarters of Rogers Communications in Toronto, Ontario, Canada October 22, 2021. REUTERS/Carlos Osorio/File Photo 2/2

By David Ljunggren, Michelle Gamage and Ismail Shakil

VANCOUVER (Reuters) -Rogers Communications Inc on Friday reinstated ousted Chairman Edward Rogers (NYSE:ROG) after a court backed his petition to constitute a new board, drawing curtains on a rare public battle for the control of a Canadian company even as the family feud showed no signs of ending.

The Supreme Court of British Columbia ruled in favour of Edward Rogers, handing a big victory to the late founder's son in a dispute that pitted him against his mother and sisters and had weighed on the stock.

The rare public fight in the Canadian corporate world was sparked over the question of who should lead the company, and some analysts have raised concerns the dispute could potentially impact Rogers' C$20 billion ($16.1 billion) bid for rival Shaw Communications (NYSE:SJR).

But soon after the ruling, Edward Rogers said that he supported CEO Joe Natale, though the entire conflict was sparked after he tried and failed to remove Natale as chief executive, saying at the time he had lost confidence in Natale's ability to lead the combined entity after the Shaw deal.

"Much has been written about Rogers CEO Joe Natale and his future," Edward Rogers said in a statement after Friday's ruling. "Mr. Natale remains CEO and a director of Rogers Communications and has the Board's support."

He said the focus must now return to closing the Shaw deal, the company's biggest M&A.

In a short statement, Rogers Communications noted the court's decision and accepted Edward Rogers as the chair, and said Natale remained as CEO.

'BLACK EYE'

Even as the brawl at the corporate level cooled off, the family fight showed no signs of easing. In a statement, the family matriarch, Loretta Rogers, and her two daughters said the ruling "represents a black eye for good governance and shareholder rights and sets a dangerous new precedent for Canada's capital markets by allowing the independent directors of a public company to be removed with the stroke of a pen."

"The company now faces a very real prospect of management upheaval and a prolonged period of uncertainty, at perhaps the worst possible time," the statement added.

Edward Rogers' attempt at dislodging Natale as CEO in September put him at odds with his mother and two sisters https://www.reuters.com/business/media-telecom/key-actors-rogers-communications-boardroom-battle-2021-11-01, who are Rogers directors. Edward Rogers - son of the late founder, Ted Rogers - lost out in the ensuing power struggle, and he was removed as the chair of Rogers Communications.

Lawyers for the company on Friday asked for a short stay in the decision to allow them to appeal, saying that if the order was effective immediately, Edward Rogers could quickly take major steps that would effectively end the chances of a legal challenge.

But Fitzpatrick denied the request, saying she was satisfied by assurances by lawyers for Rogers that the new board would not take any steps to end the family's appeal.

"Accordingly the order will be effective today and there will be no stay in proceedings," the judge said.

The crucial question for the judge was whether Edward Rogers had the power to make board changes with just a written consent.

"I have concluded that the process by which Edward obtained the Consent Resolution was available him under the Articles and the Act," Fitzpatrick said in a written ruling. "In accordance with the Articles and the Act, the Consent Resolution is deemed to be valid and enforceable," she added.

POWER STRUGGLE

Edward Rogers said the judgment confirmed that he had acted in accordance with the company's rule.

"Our family has disagreements like every other family. I am hopeful we will resolve those differences privately, as any family would," he added.

After he was removed as the chair of Rogers Communications, Edward Rogers constituted a new board that included himself as chairman, leveraging his power as chair of the family-owned Rogers Control Trust - which controls 97.5% of the company's voting shares - to do so. He then petitioned the Supreme Court of British Columbia to validate his slate of directors.

"No surprises here," said one top 20 shareholders, referring to Friday's ruling, who declined to be identified because of the sensitivity of the matter.

"And since Edward clearly has the right to vote, the control block and the case was merely about process. For shareholders, this is the best outcome because it allows for the shortest period of uncertainty," the shareholder added.

The boardroom battle and the family feud has weighed on the stock, with Rogers shares down 0.5% so far this year, compared with a 16.2% gain in rival BCE (NYSE:BCE) Inc and a 14.8% rise in Telus (NYSE:TU) Corp in the same period.

On Monday, both sides presented their cases, with lawyers for Edward Rogers arguing that he had the authority to appoint a new board without an in-person shareholder meeting.

But Rogers Communications' lawyer David Conklin told the court the late founder foresaw a stalemate between the family trust and the board of directors, and specifically requested a public meeting to resolve it.

($1 = 1.2461 Canadian dollars)

Rogers Communications reinstates ousted chair after court backs his bid to shakeup board
 

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