TORONTO –
One of Canada’s largest telecommunications companies has found itself in the bizarre position of having two boards, each of which call the other illegitimate, an arrangement that will have lasting damage, according to a pair of analysts.
Rogers Communications Inc. has been left with two groups claiming to be in control after ousted chair Edward Rogers called a Sunday meeting with five new, hand-picked board members, who he says re-elected him as board chair.
However, his mother, siblings and several other board members say the meeting was illegitimate and that the five members who were replaced by Edward Rogers remain on the board.
With Edward Rogers’ camp now promising to take his case to the British Columbia Supreme Court in hopes of a legal ruling in his favour, analysts say the saga will result in troubles for the company.
“Collateral damage now seems inevitable, and in our view, will only grow the longer a definitive resolution takes,” said RBC Dominion Securities Inc. analyst Drew McReynolds and associate Riley Gray, in a Monday note to investors.
They believe the power struggle could impact Rogers’ performance in forthcoming 5G spectrum auctions, as could raise regulatory and financial risk for its proposed merger with Shaw Communications Inc.
Rogers is still awaiting regulatory approvals for a $26-billion deal for its Calgary-based rival, Shaw, that it signed earlier this year.
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 as the unrest continues.
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 executives.
Edward Rogers, the son of late company founder Ted Rogers, on Thursday was removed from his position at the helm of the board after media reports that he was attempting to replace company CEO Joe Natale with its former chief financial officer, Tony Staffieri. Staffieri left the company effective Sept. 29, with Paulina Molnar named interim CFO.
Edward Rogers’ 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.
But Edward remains chair of the Rogers Control Trust, the controlling shareholder, which, along with Rogers family members, 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 said he started working with Ted in 1979, have publicly issued statements saying they support Edward Rogers and his role as trust chair.
Martha Rogers, who also sits on the board, has repeatedly taken aim at her brother on Twitter, describing his Sunday meeting as a “pretend ‘board meeting.”
This report by The Canadian Press was first published Oct. 25, 2021.
