TORONTO – Edward Rogers announced yesterday he intends to replace five members of the board of directors of Rogers Communications Inc. (RCI).
A press release issued late last night says Mr. Rogers “is disappointed with recent events and commentary regarding the governance of RCI and has lost confidence in the Board of RCI as currently constituted.”
Earlier yesterday evening, RCI announced its board had voted out Mr. Rogers as chair and that John MacDonald was taking over. (You can catch up on the ongoing power struggle at RCI here, here and here.)
However, Mr. Rogers remains on RCI’s board as a director and he is still the chair of the Rogers Control Trust, which holds voting control of the company.
“In my role as Chair of the Rogers Control Trust, the controlling shareholder of the company, it is my responsibility to put the interests of Rogers Communications first,” Mr. Rogers said in an emailed statement.
The Control Trust is governed by the chair, a vice-chair (currently Melinda Rogers-Hixon, who voted in favour of removing her brother as RCI board chair), the trustee of the Control Trust and a 10-member advisory committee.
According to a 2021 RCI information circular, the committee currently includes: Loretta Rogers, Lisa Rogers, Edward Rogers, Melinda Rogers-Hixon, Martha Rogers and David Robinson (Rogers family members); Alan Horn, Thomas Hull and John Tory (trustees of a trust for the benefit of Rogers family members); and Phil Lind, Ted Rogers’ long-time right-hand man.
The chair of the Control Trust is accountable to the advisory committee, which needs approval from two-thirds of its members to make most decisions such as appointing and removing the chair, the document says.
“While I am disappointed by recent steps taken by certain RCI directors to remove me as board chair, I am confident this action will be reviewed and addressed by the newly constituted board” – Edward Rogers
There is still a question, however, of what exactly is required for Mr. Rogers to make the changes he is intending to make to the RCI board.
A TD analyst report says it is unclear “if casting the votes in favour of Rogers’ Board directors is something that can be done with a simple majority vote (i.e. six versus seven), or alternatively if the bylaws state that no vote is required and it is simply at the discretion of the Control Trust Chair.”
“Our general understanding had always been that the Control Trust existed in order to avoid a situation where one family member could make unilateral decisions regarding the direction of the company, but we have no certainty on this front,” the TD report says.
If a majority vote is needed, Mr. Rogers will need six or seven votes to implement his plan to switch out board members, however, if it is completely up to the chair, Mr. Rogers would only need four votes (in this case, to retain his position as chair.)
If the chair “has sole discretion to vote the shares in favour of directors,” and if he has the support of four members of the advisory board, “then the proposed Board changes might happen,” says the TD report.
Mr. Rogers has said he has the continued support of the advisory committee.
In an emailed statement to this effect sent yesterday, Lind said: “I worked alongside Ted for most of my 53 years at RCI and am supportive of the changes that have been announced today.”
Horn, who also worked with Ted Rogers for several decades, said in a statement he looks “forward to working with Edward, the Rogers family, and the reconstituted board to help the company complete its game-changing transaction with Shaw.”
These statements indicate Mr. Rogers has as least three of the four out of 10 votes he needs to remain chair of the Control Trust.
As it is, he remains chair of the Control Trust and intends to remove John Clappison, David Peterson, Bonnie Brooks, Ellis Jacob and John MacDonald as directors of RCI.
This implies those who voted with him in favour of removing CEO Joe Natale earlier this month, include the remaining non-family members of the board: Robert Dépatie, Robert Gemmell, Horn and Lind (Horn and Lind serve on both the RCI board and the Control Trust advisory committee).
This means eight (if Natale recused himself from the vote) board members voted to keep Natale – the five Mr. Rogers wants to remove, along with Rogers family members Melinda Rogers-Hixon, Martha Rogers and Loretta Rogers.
The vote and its aftermath are what led to Mr. Rogers’s removal as chair of RCI. Now, he is not just looking to switch up the RCI board, he is fighting to get his position back.
“While I am disappointed by recent steps taken by certain RCI directors to remove me as board chair, I am confident this action will be reviewed and addressed by the newly constituted board,” Mr. Rogers said.
According to last night’s press release, Mr. Rogers submitted a shareholder resolution to RCI Class A voting shareholders. The resolution will be effective after it has been submitted to registered Class A shareholders and has been signed by a minimum of just under 67% of the Class A shares, the press release says.
“The Control Trust beneficially owns, together with private Rogers family holding companies controlled by the Control Trust, 108,403,398 Class A Shares, representing approximately 97.53% of the issued and outstanding Class A Shares.” Mr. Rogers “intends to cause the Resolution to be signed and delivered to RCI on or about October 22, 2021, following which the Resolution and reconstituted board will be effective,” according to the press release.
This morning, RCI released its own press release in response, stating it “is not aware of this mechanism ever having been utilized in respect of a public company in Canada.”
The release goes on to explain the process of removing directors of public companies “generally takes several months or happens at the company’s annual meeting.” RCI’s AGM is usually held in April.
RCI “is concerned that its controlling shareholder, the Rogers Control Trust, would seek to make such a fundamental change to the Company’s independent governance framework in this unprecedented manner.”
RCI had not, as of this morning, “received any documentation or resolution from Mr. Rogers or the Rogers Control Trust with respect to this matter,” the press release says. “If and when received, the Company will consult with its counsel regarding the legality of this course of action.”
Should Mr. Rogers be successful, he intends to replace the five board members he is moving to have removed with Michael Cooper (Toronto real estate executive), Jack Cockwell (financier), Jan Innes (currently on the board of Rogers Group of Funds, previously held several executive roles at Rogers), Ivan Fecan (long-time media executive), and John Kerr (who goes by “Jake” – he is a co-owner of the Vancouver Canadians and previously ran a forestry company) all of whom are long time associates of Lind, Mr. Rogers and of the late Ted Rogers.
“RCI has a strong management team and I am totally supportive of working with them on our business objectives, execution, and return to stability. My focus, and our company’s focus, will continue to be on securing approval for the Shaw transaction,” Mr. Rogers said in his statement.
“We believe the company should act quickly in accordance with proper governance practices to make the necessary changes to avoid prolonging the uncertainty.” – Jeff Fan, Scotiabank
“I have every confidence that with a renewed alignment between the Trust, the board of directors, and our management team, RCI is well-positioned for the future.”
The Shaw transaction has been front of mind through all of this. It still needs approval from the CRTC, the Competition Bureau and Innovation, Science and Economic Development Canada.
While previously quiet about the situation at RCI, Brad Shaw, executive chair and CEO of Shaw Communications sent out an emailed statement on the matter today.
“On behalf of my family, the Shaw Board of Directors, and our management team, I want to reiterate our continued commitment to work with Rogers Communications Inc. to close the transaction that was announced on March 15, 2021,” he said.
“Any recent reports or descriptions regarding comments made by me or Shaw Communications with respect to the composition of the Rogers Board of Directors or its management team are false. This is a Rogers Family and Board matter and out of respect for the Rogers Family it is not appropriate for Shaw Communications to comment on recent developments.”
Analysts reports published since the news broke that Mr. Rogers was looking to replace board members indicate that while not irrelevant, the ongoing drama at RCI is unlikely to have much if any impact on the company’s deal with Shaw.
“The latest media report (Globe and Mail) suggests that the independent directors sent a letter to the Advisory Committee cautioning that a CEO/management change could jeopardize the Shaw deal because of financing risk,” an analyst report from Jeff Fan at Scotiabank says.
“While we are not downplaying the risk of higher financing cost for RCI, our understanding is financing is not a condition to the deal.”
Fan, however, also says that with so much out in public at this point, “we believe the company should act quickly in accordance with proper governance practices to make the necessary changes to avoid prolonging the uncertainty. That way, the company can focus on its operations, complete the Shaw acquisition including the necessary regulatory approvals (and possible remedy) within the planned time frame, and finalize the integration plan to extract the merger synergies necessary to de-lever the company post merger.”
“The Company’s CEO, Joe Natale, and management team remain steadfast in their commitment to driving the performance of the business and executing on the proposed merger with Shaw.”
A TD analyst report indicates “even if certain Board members and/or the CEO change in the near-term, we would see no change in the assets or employees of the company, and no change in the potential for greater scale and synergies from mid-2022 onwards.”
The report says “the uncertainty of this situation is a near-term negative, in our view, but once this unfortunate Board battle distraction is resolved, we believe both cash flow and the share price will increase.”
RCI has been underperforming for a while now, relative to its peers, according to Fan’s report, which reads: “RCI shares were already trading at the cheapest level relative to its peers prior to media reports of the power struggle due to execution concerns.” He says figures indicate the concerns began before the pandemic, in 2019.
Update: Rogers Communications issued a press release this evening in which its new chair John MacDonald confirmed earlier today RCI “received a written resolution from the Rogers Control Trust purporting to remove five of the independent directors of Rogers and replace them with nominees of the Rogers Control Trust.”
RCI “reviewed the resolution with its external legal counsel and has determined the resolution is invalid.” As such, the company board remains unchanged, according to the release.
“The Company’s CEO, Joe Natale, and management team remain steadfast in their commitment to driving the performance of the business and executing on the proposed merger with Shaw.”
