BCE Inc. Bell Canada signage is displayed outside the company's office building in Toronto, Ontario, Canada, on Wednesday, Aug. 8, 2012.Brent Lewin/Bloomberg
Rogers Communications Inc. is turning to the courts in an effort to block the sale of independent cellphone retailer Glentel Inc. to one of its main wireless rivals, BCE Inc.
Toronto-based Rogers, Canada's largest wireless carrier, filed an application with the Ontario Superior Court Wednesday seeking an injunction against the $594-million cash-and-stock deal.
Glentel – which distributes both BCE and Rogers products through its 500 Canadian retail locations operating under names such as Wirelesswave and Tbooth wireless – quickly issued a press release denouncing the legal action as "without merit."
The Rogers application alleges that according to the terms of an agreement with the retailer signed July 1, Glentel requires Rogers' consent to a change of control.
Glentel disputes that view, arguing the BCE deal, which is worth $670-million including the assumption of debt, does not affect the retailer's relationship with Rogers.
"Rogers has the right to remove their products from our Canadian stores if they choose to terminate its agreement with us, but has no right under its agreement to block the acquisition of Glentel," said Tom Skidmore, chief executive officer of Glentel, which also has 735 locations in the U.S. and 147 in Australia and the Philippines.
"Approval of the acquisition is up to Glentel's shareholders, not one of our many suppliers," Mr. Skidmore added, noting that he plans to defend against the application and still hopes to close the transaction early next year.
Patricia Trott, a spokeswoman for Rogers, said the company values its relationship with Glentel and the fact that it continues to offer Rogers products in its stores.
"This court case is about protecting our rights," Ms. Trott said. "We're asking the Court to ensure they honour our agreement, which says they required our prior consent to a change in ownership."
BCE is not named as a party in Rogers' lawsuit against Glentel and a spokesman declined to comment. (BCE owns 15 per cent of The Globe and Mail.)
Analysts said last month that the deal could give BCE an edge on distribution of its Bell Mobility and Virgin Mobile Canada-branded products, even though the company said it would continue to sell Rogers devices and services (as well as its Fido and Chatr brands).
The Rogers court filing alludes to the possibility that once the retailer is owned by BCE, it will favour the sale of Bell Mobility or Virgin products and services over those of its competitor.
The application says the Glentel agreement provides that Rogers cannot unreasonably withhold its consent to a change of control of the business.
But Rogers notes the agreement also specifies that, "it would not be unreasonable for Rogers to refuse to consent to an assignment to (a) a carrier or (b) a person who Rogers does not reasonably expect will sell or solicit a comparable number of services, subscriptions or products."
In 2009, BCE bought The Source, which used to sell Rogers products but now sells exclusively BCE devices at its approximately 750 retail locations.
Glentel's board of directors has approved the transaction and is recommending it to shareholders. The Skidmore family, which owns about 37 per cent of the common equity of the company, has entered into agreements with BCE in support of the deal.
The company has scheduled a special meeting of Glentel shareholders for Jan. 12 and is mailing a proxy circular to shareholders this week, it said.