(Bloomberg) — A Canadian court backed Edward Rogers in his fight against his family at Rogers Communications Inc., handing him control of the board of the wireless and cable company in the middle of a $16 billion takeover.
Justice Shelley Fitzpatrick of the Supreme Court of British Columbia ruled in favor of the cable scion, who had argued he had the right to replace five board members without a shareholder meeting because he controls most of the company’s voting stock. The company plans to appeal.
The decision represents a major victory in Edward Rogers’s weekslong power struggle with the company and his family. His mother, Loretta Rogers, and two of his sisters joined with other directors in September to block his efforts to oust Chief Executive Officer Joe Natale.
The court’s ruling means Edward Rogers is chairman again and five independent directors who had opposed him, including former AT&T executive John MacDonald and movie theater executive Ellis Jacob, are gone.
Loretta Rogers and two of her daughters, Melinda Rogers-Hixon and Martha Rogers, decried the ruling in a joint statement, saying that it comes at a “dangerous time” as Rogers Communications seeks to complete its takeover of Shaw Communications Inc. The company is now faced with the prospect of management changes and a prolonged period of uncertainty, they said.
“We are very disappointed with the court’s ruling, which 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,” Loretta Rogers, Martha Rogers and Melinda Rogers-Hixon said in an emailed statement.
‘Shakespearean Drama’
Members of the Rogers family tried to hash out a compromise and met on Thursday to discuss ways to settle the fight, but they couldn’t come to an agreement, according to a person familiar with the matter. Instead, both sides’ lawyers met in a Vancouver courtroom an hour after markets closed on Friday to hear Fitzpatrick’s decision.
In her ruling, she noted the bitter nature of the family dispute, including the “spirited, if not inflammatory” tweets of Martha Rogers against her brother. But the judge said that had no bearing on the issues of law, which revolved around the company’s own rules in its articles of incorporation.
“These family squabbles are an interesting backdrop to this dispute that would be more in keeping with a Shakespearean drama. They have no doubt added a voyeuristic element on the part of many into the lives of a very wealthy Canadian family and this aspect of the dispute has driven some media coverage,” she wrote. “However, in my view, the family issues are of little assistance in determining the narrow legal issue raised.”
Rogers vs. Rogers Feud Goes to Court: What You Need to Know
Natale’s future is in question. Edward Rogers said in an emailed statement that he wants “a return to stability” and a focus on closing the Shaw deal. “Mr. Natale remains CEO and a director of Rogers Communications and has the board’s support,” he said, contradicting his previous actions regarding the CEO.
Lawyers for Edward Rogers said in court that he has promised not to make immediate management changes, pending the appeal of the decision. But he also said in court filings that he has been concerned for a long time about the executive, who has been CEO since April 2017. His court filings included a presentation that showed Rogers trailing BCE Inc. and Telus Corp. on a number of measurements — including the share price.
It’s unusual for a company to change top executives while in the midst of a landmark acquisition. Rogers Communications’ proposed takeover of rival Shaw is the second-largest acquisition by a Canadian company this year.
The turmoil already has raised risks for the transaction by lending credence to rivals’ arguments to regulators that Rogers Communications isn’t fit to govern such a large enterprise, said Richard Leblanc, a professor of governance, law and ethics at York University.
“This infighting is coming at a cost,” he said in an interview.
Representatives of Shaw declined to comment on the ruling. They’ve previously said they’re committed to the deal, and Shaw investors have already voted in favor of it.
The Shaw deal, if it is approved by regulators next year, is set to further expand the reach of Rogers Communications, which already has more than 11 million wireless customers — about 30% of Canada’s population. The company also has extensive holdings in cable and internet service, TV broadcasting, radio and sports, including the country’s only Major League Baseball team.
Fractured Family
While the court settled a legal question over Edward Rogers’s authority to unilaterally appoint the board, it’s unlikely to resolve the tensions that fractured one of nation’s wealthiest families and revealed major governance concerns at the telecommunications giant.
The public company is controlled by a family-owned trust holding about 97% of the voting shares and is chaired by Edward Rogers.
That structure triggered an unprecedented corporate succession feud in September when Edward Rogers sought to replace Natale with then-Chief Financial Officer Tony Staffieri. The board rejected the plan and fired Staffieri on Sept. 29.
Three weeks later, the board stripped Edward Rogers of his role as chairman and gave it to MacDonald.
Edward Rogers, as chair of the family trust, retaliated by trying to remove five directors and replace them with his allies. The “new board” subsequently reinstated him as chairman. The company said that board was illegitimate and refused to recognize it until Friday evening after Fitzpatrick’s ruling.
As a result, for almost two weeks, one of Canada’s largest public companies had two different men claiming to be chairman, and two rival groups claiming to represent the 14-person board.
“This is a poster child of what can go wrong with dual-class shares,” Catherine McCall, executive director of the Canadian Coalition for Good Governance, said in an interview before the ruling was handed down. “It’s a really good example of how when it goes wrong, it can really go wrong.”
(Updates with Edward Rogers’s statement, chart and other changes)
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