Two separate Boards claim authority over Rogers

Ousted Rogers Communication Inc. chairman Edward Rogers intends to initiate proceedings in the British Columbia Supreme Court to confirm and implement his reconstructed Board of Directors after a Sunday night meeting of the new board. The Sunday night announcement comes after Edward Rogers' Friday move to remake the Rogers Board of Directors, in which the ousted chair of the board is seeking to use his position as chair of the Rogers Control Trust, the controlling shareholder of the company. In a Saturday press release, John MacDonald -- who was appointed chair of the Board of Directors in a Thursday evening announcement -- said that Edward Rogers proposed slate of directors “does not comply with laws of British Columbia, where Rogers Communications Inc. is incorporated, and is therefore not valid." “Accordingly, the purported Board meeting and anything that may arise from such a meeting is also invalid. It is disappointing that the former Chairman is attempting to act unilaterally without regard for the interests of the company and all of Rogers’ shareholders,” MacDonald said in the release. Then on Sunday ahead of the meeting of the newly created Edward Rogers-aligned board, MacDonald, Loretta Rogers, Melinda Rogers-Hixon, Martha Rogers, and several other members of original board, released another statement rejecting any changes made after Thursday, when Edward Rogers was ousted. “We unequivocally support Joe Natale as CEO and support his management team…. We remain as duly elected members of the Rogers Communications Inc. board and represent the majority of the board members of the company. No other group of individuals has any authority to purport to act as the Board of Directors of Rogers Communications Inc.,” the statement read. In a Monday note, RBC Capital Markets analyst Drew McReynolds wrote that it is becoming more likely that the boardroom drama will decrease value for the company’s shareholders. “In the absence of an immediate and definitive resolution to the ongoing family-board dispute, we see two sources of collateral damage irrespective of the ultimate resolution: an executive management team that is likely less effective over the next 12 months in executing in what is an operating environment still impacted by COVID-19 with competition intensifying as telcos double down on FTTH… and what will be a difficult (but not impossible) road back to restoring investor confidence around governance,” he wrote. McReynolds said that a sustainable family-board-executive alignment will matter for “critical upcoming decisions: such as its planned merger with Shaw Communications Inc. and key 5G spectrum auctions. However, McReynolds said, the merger is likely to go through assuming there is a “timely and definitive resolution” to the ongoing board dispute. “We believe there remains strong and broad internal support at Rogers for the transaction given its transformational nature and virtually indisputable industrial logic,” he said. In a Monday morning note, National Bank analyst Adam Shine wrote that, as of yet, the skirmishes do not threaten the pending acquisition of Shaw. On the possibility for a court ruling on the dispute over the composition of the Board of Directors, Shine wrote that investors of "Rogers as well as Shaw may want to see the status quo prevail in terms of management getting the Shaw deal over the touch line. Some may view this path as offering the least risk. The good news is that financing risk is not apparently an issue for the Shaw deal and Rogers has already made significant submissions to regulators." Shine also wrote that the chaos at the Board level could also hurt stock prices. "We don't see how the stock moves materially higher ahead of some clarity. More caution is warranted on the name than what prevailed a few days ago and a contraction is more likely amid the headlines." Canaccord Genuity analyst Aravinda Galappatthige wrote in his own Monday morning note that the "impression of two alternative boards claiming legitimacy is likely to be particularly concerning for investors." "We believe this is potentially very distracting to senior and middle management and potentially compromises the operational focus of the company, while also damaging investor confidence in the corporate governance structure," he wrote, and cut the stock's target price from $69 to $62, and downgraded the stock's status from "buy" to "hold." He added that the chaos could have advantages for BCE Inc. and Telus Corp. "We also believe that the current state of affairs with respect to corporate governance at Rogers is yet another reminder to investors of the genuine differences between BCE/TELUS and family-controlled entities with dual-class capital structures," Galappatthige wrote. — Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and Michael Lee-Murphy and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

Two separate Boards claim authority over Rogers

News | 10/25/2021 10:22 am EDT

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