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Noah Zivitz

Managing Editor, BNN Bloomberg

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The Rogers family feud that has resulted in duelling boards of directors claiming to be in charge and threatening each other with legal action has drawn the ire of Bay Street analysts.

Drew McReynolds at RBC Capital Markets downgraded Rogers Communications Inc. to sector perform from outperform and cut his price target to $72.00 per share from $76.00, saying it was time to “step to the sidelines” as the power battle plays out.

“In our view, functioning governance and family-board-executive alignment absolutely do matter at this juncture for Rogers,” he said in a report to clients Monday.

The battle at the country’s largest wireless telecommunications operator is pitting Edward Rogers against his mother and sisters. Mr. Rogers claimed on Sunday to have regained the role of chairman of Rogers’ board after an initial meeting with his hand-picked team of directors who he said had been installed after he availed himself of his power as chair of the Rogers Control Trust.

His mother, Loretta Rogers, released a statement Sunday evening on behalf of the directors who have not sided with Mr. Rogers, saying they continue to support the company’s management team and that Mr. Rogers’ faction doesn’t have “any authority to purport to act” as the company’s board.

For McReynolds, the fast-evolving story is imperiling not just day-to-day execution at Rogers, but also crucial decisions awaiting the company as it relates to closing the planned $20-billion takeover of Shaw Communications Inc.

“In the absence of an immediate and definitive resolution to the ongoing family-board dispute, we see two sources of collateral damage irrespective of the ultimate resolution: (i) an executive management team that is likely less effective over the next 12 months in executing in what is an operating environment still impacted by COVID-19 with competition intensifying as telcos double down on [fiber-to-the-home]  – either by the existing team that is now distracted if not handicapped, or a new team that will be in a sub-optimal period of transition.

“And (ii) what will be a difficult (but not impossible) road back to restoring investor confidence around governance and sustainable family-board-executive alignment.”

Aravinda Galappatthige, who covers Rogers Communications at Canaccord Genuity Capital Markets, also downgraded the stock on Monday to hold from buy and trimmed his price target to $62.00 per share from $69.00. He cited similar reasons, and said it’s impossible to predict the outcome of a legal battle since the full details of the Rogers Control Trust aren’t known. 

“We believe this is potentially very distracting to senior and middle management and potentially compromises the operational focus of the company, while also damaging investor confidence in the corporate governance structure,” said Galappatthige in a report to clients. 

Jerome Dubreuil at Desjardins Capital Markets joined the fray late on Monday. He downgraded Rogers Communications to hold from buy, and cut his 12-month price target to $68.00 per share from $73.00, saying the turmoil is a “major distraction” at a crucial juncture.

“While we see attractive long-term (3+ years) value in RCI shares from the [Shaw] transaction and the reopening of the economy, the significant uncertainty and likely distraction at the board/management level during such a pivotal period in strategic planning makes it difficult for us to recommend adding RCI exposure. Our view could change with better visibility on the company’s strategy.”

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