More than a month after company chair Edward Rogers attempted to oust the chief executive officer and other senior executives, triggering a spectacular boardroom showdown that split the Rogers family, Joe Natale remains at the helm of Canada’s largest wireless carrier.
Analysts said on Monday that Mr. Rogers may preserve the management team at least until after the proposed $26-billion takeover of Shaw Communications Inc. is complete. The deal, which is expected to close in the first half of next year, is awaiting regulatory approvals.
However, Bank of Montreal analyst Tim Casey said in a research note that “the relationship between the chairman and CEO remains a concern for shareholders.”
Documents filed with the B.C. Supreme Court revealed that Mr. Rogers, who is also the chair of the family trust that controls the Toronto-based telecom, has harboured concerns about the CEO’s performance for two years – and was particularly worried about Mr. Natale’s ability to lead the company after the merger.
“It’s hard to walk back something like that, especially in the near term,” Scott Rattee, senior vice-president at DBRS covering telecom, media and technology, said in an interview.
“I think it’s quite plausible that in order to get the proposed transaction, give it its best chance for completion, there will probably not be much disruption from here. ... But longer term, there is likely to be some sort of question mark that remains,” Mr. Rattee added.
Andrew Garas, a spokesperson for Rogers Communications, declined to comment.
The family and boardroom conflict broke out after Mr. Rogers attempted to replace Mr. Natale in September with then-chief financial officer Tony Staffieri and oust other senior executives.
After resistance from the company’s board, Mr. Rogers tried to replace the independent directors who had opposed him with his own candidates. The move plunged the company into chaos by effectively creating duelling boards, each claiming to be the legitimate one.
Amid the uncertainty over the board, advocacy groups and rival telecoms BCE Inc. and Telus Corp. urged Canada’s telecom regulator to postpone a coming hearing into the Shaw takeover.
B.C. Supreme Court Justice Shelley Fitzpatrick ruled on Friday that Mr. Rogers’s move to reconstitute the board through a written resolution is valid. Lawyers for Rogers Communications had argued such a move requires a shareholder meeting.
In a letter to the Canadian Radio-television and Telecommunications Commission on Monday, Ted Woodhead, senior vice-president of regulatory affairs at Rogers, said the ruling has resolved uncertainty surrounding the board. As such, the Nov. 22 hearing into the transfer of Shaw’s broadcasting assets to Rogers should proceed, he said.
Mr. Woodhead also cited a statement from Mr. Rogers on Friday that Mr. Natale remains a company director and CEO and has the support of the board.
“Our focus must be on the business, a return to stability, and closing our transformational merger with Shaw Communications,” Mr. Rogers said on Friday.
It’s unclear why Mr. Rogers appears to have changed his position on Mr. Natale. Ken McEwan, a lawyer for Mr. Rogers, assured the judge on Friday no management changes would be made ahead of an appeal. However, Rogers Communications announced late Sunday that it will not appeal the ruling.
A spokesperson for Mr. Rogers said on Monday that nothing changed over the weekend.
The Globe has reported that Mr. Natale and most of his 11-member executive team were prepared to leave if Mr. Rogers’s move to replace the independent directors succeeded.
Edward Jones analyst Dave Heger said Mr. Rogers may be waiting for the Shaw takeover to close.
“I’d think he wants to keep things stable until they can get all the regulatory approvals,” Mr. Heger said. “The message Edward Rogers may be getting is that this [shakeup] was not well received and it created a lot of disruption in the company.”
He added that the threat of a debt rating downgrade could have also factored into Mr. Rogers’s decision.
Last week, before the court ruled, credit-ratings agency Moody’s Investors Service announced that the disagreements and “management uncertainties” would factor into its review of Rogers’s debt for possible downgrade.
Moody’s initiated the review in March, when the Shaw deal was announced. But on Thursday, Moody’s said the recent actions at the board level were “not expected” from companies such as Rogers that the agency defines as a moderate risk.
“Separate from governance concerns related to the Shaw acquisition, the ongoing disagreement between family members, the disagreement between Edward Rogers and the current CEO, past and current uncertainty of the role of Rogers’ CEO versus Edward Rogers as the chair, and the true independence of Rogers’ directors, has materially increased our governance concerns,” Moody’s senior analyst Peter Adu wrote.
In an e-mail to employees on Monday morning, Mr. Natale briefly noted that the company had decided not to pursue an appeal, before discussing its annual November charity event.
“And later this month you’ll hear more from me about how our company is supporting Generation Possible – through one of our signature social impact programs – by providing Ted Rogers Community Grants to organizations from coast-to-coast-to-coast who are ensuring youth can achieve their highest potential,” Mr. Natale wrote.
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