The board of Rogers on Thursday voted out Chairman Edward Rogers, son of the late founder Ted Rogers, after he tried to replace Chief Executive Officer Joe Natale with another executive.
Hours later, Edward Rogers said as chair of the Rogers Control Trust, the family-controlled entity that owns the majority of ownership shares in RCI, he would remove the five RCI board directors https://www.reuters.com/business/media-telecom/rogers-communications-misses-quarterly-revenue-estimates-2021-10-21 who acted against him.
Rogers' move was the latest in a tumultuous period during which he has been at odds with his sisters and mother, all of whom are also board directors and who backed Natale.
The company said on Friday that it has received a written resolution from the Rogers Control Trust to remove five independent directors and replace them with its own nominees.
"The company has reviewed the resolution with its external legal counsel and has determined the resolution is invalid," it said in a statement, adding that its board and CEO remain unchanged.
A vote to remove Edward Rogers as chair of the Rogers Control Trust failed, Bloomberg News reported earlier on Friday, with only four of the required minimum seven out of 10 advisers to the trust voting for his ouster.
"Edward has miscalculated his legal position. There is no precedent by which he can simply fire five independent Rogers directors and replace them at a whim," Melinda Rogers-Hixon, Edward's sister and vice-chair of the Rogers Control Trust, said in a statement to the Globe and Mail newspaper.
"The law is clear, and as the company stated today, directors of public companies are removed at meetings of shareholders, convened after proper notice and with full disclosure to all shareholders," Rogers-Hixon added. "While Edward appears unwilling to grasp this basic fact, this doesn't make it any less true or relevant in this case."
J.P.Morgan analysts said they hoped the boardroom battle would not overshadow the timeline or approval process of the deal to buy smaller rival Shaw.
"We maintain our base case that Rogers will be able to close its transformative acquisition of Shaw in 1H22 following the divestiture of some or all of Shaw's wireless business," J.P.Morgan wrote in a note to investors.
While the company's bid for Shaw would further boost its position in Canada's highly concentrated telecoms market, it has attracted scrutiny from multiple government regulators over whether it would decrease competition.
Scotiabank analysts said they expect the deal to get regulatory approvals within the planned timeline of the first half of next year.
Morningstar analyst Matthew Dolgin said in a note that although both sides seemed to agree on the Shaw deal, the drama was "an example of why we previously chided the company for its lack of best corporate governance practices due to the family control."
The structure of the Rogers Control Trust is a unique feature among Canadian companies, said David Brown, a corporate governance consultant.
Normally each family member would control their individual shares, but Ted Rogers' estate set up the trust to represent all the family members together, meaning the 97.5% of Class A ownership shares are controlled by the family trust vote as one.
The purpose seems to be to "avoid impasses (between family members) that would block any votes from getting through the organization," Brown said, adding that the structure gives the chair of the trust "some pretty unprecedented powers."
But, Brown said, Rogers is still accountable to the family.
"Edward is allowed to do what he's doing until the rest of the family step in and stop him," Brown said.
($1 = 1.2377 Canadian dollars)
(Reporting by Uday Sampath in Bengaluru; Editing by Sweta Singh, Will Dunham and Arun Koyyur)
By Moira Warburton and Uday Sampath Kumar