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Duelling Rogers boards creating uncertainty for company, CEO and Shaw deal

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TORONTO — As two groups battled for control of Rogers Communications Inc. and one side promised forthcoming legal action, the telecommunications company plunged deeper into uncertainty Monday.

Business industry observers and analysts began to warn of a lack of clarity over who is really in charge and predict difficulty ahead for Rogers, while ousted board chair Edward Rogers claimed he was re-elected chair on Sunday is backed by a new hand-picked board.

His mother, sisters and several other board members dispute that claim, saying his re-election meeting was illegitimate and that the five members who were replaced by Edward Rogers remain on the board.

With Edward's faction saying it will take their case to the British Columbia Supreme Court to verify the new board's legitimacy, observers say the ongoing saga will bring instability and confusion to every level of the company. 

"The longer this drags out, who makes the deals? Who signs the papers? Is it the hands of the new board or the old board?" asked Richard Powers, national academic director of the Rotman School of Management.

Until a court rules or both sides come to a consensus, Powers believes questions like these will dog the company and hold up not just day-to-day business but also strategic moves.

Caught in the middle will be Rogers CEO Joe Natale, who became the epicentre of the drama when recent media reports revealed Edward Rogers was trying to remove him from his position. 

Edward, the son of late company founder Ted Rogers, wanted Natale replaced with former chief financial officer, Tony Staffieri. Staffieri left the company effective Sept. 29, with Paulina Molnar named interim CFO.

Edward's mother Loretta Rogers, whose family money Ted used to start Rogers Communications, and his sisters, Martha Rogers and Melinda Rogers-Hixon, opposed Edward's plan and a power struggle began. 

All three hold board seats at the company. 

Powers suggested that it will be difficult for Natale to stay on, regardless of the outcome. 

"If Edward is successful, even partially successful, you really have to wonder if Mr. Natale is going to be able to retain his position and whether he or others be looking for the door."

Edward's odds of removing Natale are high because he remains chair of the Rogers Control Trust, the controlling shareholder, which owns 97 per cent of Class A voting shares.

To oust Edward from his role as trust chair, two-thirds or 67 per cent of the 10-person board would need to vote in support of removing him.

Phil Lind, a former vice-chairman at Rogers, and Alan Horn, who started working with Ted Rogers in 1979, have issued statements saying they support Edward Rogers and his role as trust chair.

Whichever faction comes out on top will have to deal with the company's plan to acquire Shaw Communications Inc. 

The $26-billion deal was signed in March and is still awaiting regulatory approvals.

Competition Bureau spokesperson Jayme Albert refused to share what stage his organization's review is at or whether it is looking at the ongoing Rogers drama, but said it is aware of the company's recent governance issues.

Shaw's executive chairman and CEO Brad Shaw has reaffirmed his commitment to the takeover, but his company's stock has fallen in recent days amid the turmoil at Rogers.

"The longer this drags out, it puts that deal at risk, particularly if the stock price starts to drop," Powers said.

Rogers originally agreed to buy Shaw for $40.50 per share, but the stock closed at $34.72 on Monday.

"At what point do they renegotiate?" said Powers. "Why would you pay $40 when you can buy the stock for $34?"

RBC Dominion Securities Inc. analyst Drew McReynolds and associate Riley Gray also think the agreement is at risk. 

"Collateral damage now seems inevitable, and in our view, will only grow the longer a definitive resolution takes," they said in a Monday note to investors.

Without an immediate and definitive resolution to the ongoing dispute, McReynolds and Gray see two sources of "collateral damage irrespective of the ultimate solution."

The first is an executive management team that is less effective over the next year while it faces continued challenges from the COVID-19 pandemic and intensifying competition as telecommunications companies race to launch fibre-to-the-home technology. 

McReynolds and Gray think the existing board will be "distracted, if not handicapped" as the boardroom battle goes on and Edward Rogers' board will be in a "suboptimal period of transition." 

The second source of collateral damage, they say, will be "a difficult (but not impossible) road back to restoring investor confidence" around governance and the executive team.

Walied Soliman, a Norton Rose Fulbright Canada LLP lawyer representing Melinda Rogers-Hixon, said his client wants a resolution that respects her father's wishes and Rogers' 24,000 employees.

"There isn't it a morning or evening that has passed, where Melinda hasn't said to me ... is there a path to settlement?" he said. 

Asked whether she will pursue legal action or try to alter Rogers' corporate structure, Soliman said his client is still "observing the situation carefully" and "not looking to rewrite her father's will."

"The structure that Ted Rogers had set up was one of great power in the hands of the control trust chair with substantial and real checks and balances," said Soliman.

"Melinda wants to ensure that balance continues."

Meanwhile, Martha Rogers has taken to Twitter, vowing to keep fighting her brother for "destroying" her father's company and "making his biggest fear a reality."

This report by The Canadian Press was first published Oct. 25, 2021.

Companies in this story: (TSX:RCI.B)

Tara Deschamps, The Canadian Press