Canada court sides with former Rogers Communications chair in boardroom brawl

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VANCOUVER (Reuters) -A Canadian court on Friday backed a petition by former Rogers (NYSE:ROG) Communications Inc chairman Edward Rogers to validate a new board constituted by him, in a ruling that could result in a major management shakeup in the country’s biggest wireless carrier.

British Columbia Supreme Court Justice Shelley Fitzpatrick announced the decision but did not immediately give her reasons.

A rare public fight in the Canadian corporate world was sparked over the question of who should lead the company and has weighed on the stock. Some analysts have raised doubts about the fate of Rogers’ C$20 billion ($16.1 billion) bid for rival Shaw Communications (NYSE:SJR).

“No surprises here,” said one top 20 shareholder who declined to be identified because of the sensitivity of the matter.

“And since Edward clearly has the right to vote, the control block and the case was merely about process. For shareholders, this is the best outcome because it allows for the shortest period of uncertainty,” the shareholder added.

Lawyers for the company asked for a short stay in the decision to allow them to appeal, saying that if the order was effective immediately, Edward Rogers could quickly take major steps that would effectively end the chances of a legal challenge.

But Fitzpatrick denied the request, saying she was satisfied by assurances by lawyers for Rogers that the new board would not take any steps to end the family’s appeal. “Accordingly the order will be effective today and there will be no stay in proceedings,” the judge said.

Rogers stock is down 0.5% so far this year, compared with a 16.2% gain in rival BCE (NYSE:BCE) Inc and a 14.8% rise in Telus (NYSE:TU) Corp in the same period.

On Monday, both sides presented their cases, with lawyers for former chairman Edward Rogers arguing that he had the authority to appoint a new board without an in-person shareholder meeting.

The company lawyers countered, saying that due process was not followed while naming a rival board.

Edward Rogers is the chair of the family-owned trust, which controls 97.5% of the company’s voting shares, which his lawyers claims gives him the authority to do so.

But Rogers Communications’ lawyer David Conklin told the court that the late founder foresaw a stalemate between the family trust and the board of directors, and specifically requested a public meeting to resolve it.

The dispute started after Edward Rogers tried to push out Joe Natale as Rogers’ CEO in September, which put him at odds with his mother and two sisters, who are Rogers directors. Edward Rogers lost out in the ensuing power struggle, and he was removed as the chair of Rogers Communications.

But Edward Rogers constituted a new board, leveraging his power as the chair of the Rogers Control Trust, which named his the chair. He then petitioned the Supreme Court of British Columbia to validate his slate of directors.

($1 = 1.2461 Canadian dollars)