(Bloomberg) -- The boardroom fight at Rogers Communications Inc. takes a decisive turn on Monday, when the Supreme Court of British Columbia starts hearing legal arguments in a dispute that has fractured the Rogers family and left the company in limbo.
The Shakespearean family feud is one of the most closely-watched corporate law cases in Canada in recent memory. Here’s why and what’s at stake.
What’s the argument about?
Rogers Communications is Canada’s largest wireless company with more than 11 million customers. It also has extensive holdings in cable and internet service, TV broadcasting, radio and sports, including the Toronto Blue Jays, the country’s only Major League Baseball team.
Sitting on top of the empire is one of the country’s wealthiest families, which retains control through a family-owned trust that has about 97% of the voting shares.
Edward Rogers, the only son of late founder Ted Rogers, is the chair of that trust, and he’s attempting to use the position to change five of 14 directors so that he and his allies will again have a majority on the board.
He filed a petition with the B.C. court to affirm that, as trust chair, he can do it with the stroke of a pen via written shareholder resolution.
But the company and a faction of his family -- including his mother, Loretta Rogers, and two of his sisters -- say this violates the company’s own rules. Loretta Rogers said in a court filing Friday that her late husband, in his written wishes, specified that disputes like this should go to a shareholder vote.
How did we get here?
Tensions has been brewing for a while as Edward Rogers grew dissatisfied with the company’s performance under Chief Executive Officer Joe Natale. In September he tried to orchestrate Natale’s departure and replace him with Chief Financial Officer Tony Staffieri.
Staffieri would have been the company’s fifth CEO in the past decade (including one interim boss). But this time, the proposed changed ignited a boardroom showdown. Edward Rogers’s mother, sisters and a group of independent directors blocked Natale’s ouster, fired Staffieri and eventually stripped Edward of his role as chairman.
That’s when Edward Rogers pulled the trigger on his plan to change the board and reinstate himself as chairman. So now there are two groups claiming to represent the board, two men claiming to be chairman, and an interim CFO at Rogers, just as it tries to close a $16 billion takeover of rival Shaw Communications Inc.
What’s the complaint about Natale?
It’s a question of growth, as reflected in the stock price, which has trailed rivals BCE Inc. and Telus Corp. by a wide margin, losing almost 14% in the past three years.
Rogers brought in Natale, a longtime Telus executive, to improve customer service and help close the gap in wireless customer retention, or “churn,” where Rogers has long been a worse performer than Telus.
But growth in wireless service revenue is tepid and Covid-19 travel curbs hurt the company’s large roaming business. Its media division is barely profitable and carries the weight of an expensive rights contract with the National Hockey League, signed long before Natale’s arrival.
The Shaw purchase, which has yet to receive regulatory approval, marked the return of the aggressive approach to dealmaking that Ted Rogers was famous for. Just months earlier, the company was forced to give up a hostile bid for a smaller target, Quebec-based Cogeco Inc., after the controlling Audet family rebuffed it.
What happens when the judge decides?
If the B.C. court rules in Edward Rogers’s favor, it means he’ll get the board changes he wants quickly -- and Natale could be out the door soon after.
If the court forces a shareholder meeting, the uncertainty will drag on for the company and its 24,000 employees.
As long as he stays as chair of the family trust, Edward Rogers still controls enough votes to get his way. But the process will be arduous. A shareholder meeting requires weeks of notice and a public disclosure. He would have to spell out, in detail and in writing, why he feels the need to change the board in the middle of the company’s biggest-ever acquisition.
Already, hundreds of pages filed in court have revealed more about the Rogers family dynamic than family members probably ever wanted to share.
Meanwhile, investors are watching in disbelief. The drama has made the shares cheap, but it’s safer to wait for the “fiasco” to be sorted before buying the stock, one portfolio manager said last week.
©2021 Bloomberg L.P.
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