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The French version of the COGECO website is seen in Montreal on Sept. 2, 2020.

Paul Chiasson/The Canadian Press

A takeover battle for Cogeco Inc. and its subsidiary Cogeco Communications Inc. has grown increasingly hostile, with both sides accusing the other of flouting corporate governance rules.

In a letter released late Wednesday, Cogeco lead director James Cherry accused suitors Rogers Communications Inc. and New York-based cable company Altice USA Inc. of using “bad faith tactics, some of which created confusion in the market” in making a $10.3-billion bid for the companies.

Mr. Cherry made the claim after the chief executives of Rogers and Altice sent a letter the previous day stating Cogeco “boards and their independent directors failed to fulfill their most basic duties in representing the shareholders they are duty bound to represent and protect” when Cogeco turned down the takeover bid on the day after it received the offer.

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The duelling letters mark an escalation in the fight for Cogeco, which is controlled by the Audet family through a dual share structure that sees the family hold the majority of votes at both companies. (The family owns far less equity than Rogers, the single largest shareholder in Cogeco and Cogeco Communications.) Prior to release of the two letters on Wednesday, Rogers CEO Joe Natale and Altice CEO Dexter Goei had gone out of their way to praise the Audet family’s legacy.

On Wednesday, Rogers and Altice said in a joint statement: “We remain committed to pursuing this transaction and are open to engaging with shareholders and the boards in a constructive manner.”

Rogers and Altice went public on Sept. 2 with an unsolicited offer for the two Cogeco companies. The proposed deal would see Altice snap up Cogeco’s U.S. cable network, Atlantic Broadband, while Rogers would acquire Cogeco’s Canadian operations.

Mr. Cherry said Cogeco’s directors received the takeover proposal on Sept. 1 in the afternoon. The Audet family was blindsided when Rogers and Altice went public with their takeover bid on the following morning, minutes before markets opened. The would-be buyers failed to disclose that the deal had already been rejected, Mr. Cherry said.

“We can only surmise that this was done with a view to misleading investors and increasing the stock price in an attempt to put pressure on the family to sell,” reads the letter, which Mr. Cherry signed on behalf of both Cogeco boards. Mr. Cherry is the former CEO of Aéroports de Montréal.

On Tuesday, Rogers' Mr. Natale and Altice’s Mr. Goei sent Cogeco executive chairman Louis Audet a letter that said Cogeco failed to follow the “appropriate process” when considering the takeover offer.

The boards of the two Cogeco companies did not establish independent committees to consider the offer or refer the offer to the existing Strategic Opportunities Committee, according to Mr. Natale and Mr. Goei.

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“We do not understand how you as a board member of Cogeco Inc. and Cogeco Communications Inc., with the responsibility to act in the interests of all of the stakeholders, could have behaved in this unacceptable manner,” the letter addressed to Mr. Audet reads.

The Rogers and Altice chief executives concluded by requesting a meeting this week with Mr. Cherry “to better understand the rationale of the boards and independent directors behaving in this manner.”

Governance experts say it is unusual for a public company to adopt what is known as a “just say no” defence to a takeover bid, even if the business is family controlled. York University law professor Richard Leblanc said best practices in these situations is for independent directors to form a committee, hire advisors and do a “deliberative” review of the offer, which may take several weeks.

“I see a founder here who seemed to take it personally, and rejected the offer outright,” Mr. Leblanc said. “That raises the issue of what type of process, if any, was followed.”

Mr. Natale of Rogers also said this week at a Bank of Montreal conference that his deep-pocketed company is better positioned to deliver the latest 5G telecom technology to Cogeco customers in Ontario and Quebec. In response, Mr. Cherry highlighted Cogeco’s plans to spend $1-billion upgrading its Canadian networks over the next four years, a strategy that includes potentially rolling out wireless services. In dismissing requests for a meeting, Mr. Cherry said: "We will not engage in a futile exercise aimed at diverting the attention of management and key resources from our business operations while creating friction among our stakeholders.”

The takeover bid has also faced opposition from Quebec Premier François Legault, who has expressed concerns about losing Cogeco’s Montreal headquarters. In response, Rogers has vowed to keep Cogeco’s management team and head office in Quebec if the acquisition is successful.

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