A Cogeco sign hangs at the company's annual general meeting in Montreal in 2014.The Canadian Press
If anyone still thinks that Louis Audet was simply holding out for more money when his family turned down a $10.3-billion takeover offer last week, the Cogeco Inc. executive chairman would like to set the record straight.
“I want to provide absolute clarity for stakeholders regarding our intentions in response to the recent unsolicited proposal to acquire Cogeco. Our shares are not for sale. And let me be clear, our refusal is not a negotiating position, it is definitive,” said Mr. Audet on Monday, in an e-mail to The Globe and Mail. The message came in the wake of a bid for Cogeco and subsidiary Cogeco Communications Inc. from New York-based cable company Altice USA Inc. and Toronto-based Rogers Communications Inc.
Mr. Audet, a cable guy who earned a Harvard MBA, provided a brief history lesson on Monday. He said his father Henri launched Cogeco 63 years ago in Trois-Rivières, Que., “planting the seeds for a business that is an incredible growth story today.”
“The company went public in 1985, and annual revenues at that time had grown to $20-million. Today, they are $2.5-billion,” Mr. Audet said. “The business is well-managed, growing, strategically positioned for the evolving and dynamic future of the telecommunications and media industries. My family, in co-operation with our strong management team, takes great pride and satisfaction in our long-term vision for the continued growth of Cogeco and the ownership structure that makes this long-term vision possible.”
This message came in the wake of a press release last week when Mr. Audet said: “The family takes pride in its stewardship role at both companies,” meaning Cogeco and Cogeco Communications.
Stewardship. Not a word that typically trips off the tongue during a takeover battle. When faced with the prospect of being handed buckets of money – last week’s bids were pitched at 30 per cent premium to where the two Cogeco stocks were trading, and offered the Audet family $800-million in cash – most executives respond with an earnest promise to maximize value. They don’t say no, they say more. Most chief executives and directors adhere to the cult of the shareholder. At a certain price, any publicly traded business is for sale.
Mr. Audet didn’t follow that script in last week’s release. Instead, he spelled out his family’s values. Call it the cult of the purpose-driven corporation.
First, he said Montreal-based Cogeco is proud to serve more than 600,000 customers. Then Mr. Audet said the company is focused on “enriching the communities” where it operates. Only after setting out these two priorities did Mr. Audet say Cogeco strives to earn “superior returns for shareholders through sound growth strategies.” (In follow-up calls with reporters, Cogeco’s people did discreetly point out that over the past two years, their parent company’s stock is up 30 per cent, while Rogers shares are down 17 per cent.)
The fact that Mr. Audet could tell his suitors to get lost without provoking howls about the evils of entrenched management at dual-class share companies – the Audet clan controls Cogeco through its ownership of multiple voting shares – speaks to a shift in investor sentiment around stock performance, and the concept of purpose-driven corporations.
Mr. Audet can credibly say that on his family’s watch, they have created significant wealth for all stakeholders. That includes investors, but also Cogeco employees who were encouraged to upgrade their skills, as well as communities that received charity donations and benefited from a 14-per-cent reduction in the company’s greenhouse gas emissions over the past five years. Those hard-to-measure metrics are increasingly important to many institutional investors.
Cogeco’s leader can also point to research from National Bank of Canada that shows this country’s family-controlled businesses are outperforming the broad market. Last year, National Bank created what it calls the Canadian Family Index, made up of 43 publicly traded companies controlled by entrepreneurs or their heirs. Quebec companies, including Cogeco, feature prominently on this list.
National Bank found that between 2005 and 2018, the family index boasted a 206-per-cent total return, compared with a 133 return from the S&P/TSX Composite. On an annualized basis, the score also favoured families – the index was up 9 per cent, versus 6.7 per cent annually for the S&P/TSX benchmark.
As part of the report, National Bank quoted Galen G. Weston, executive chairman of Loblaw Cos. Ltd.: “Continuity, patience, and the luxury of a long view are fundamental to the success of family firms. By creating value over decades and generations, rather than quarters and years, successful family firms outperform those seeking short-term shareholder returns.”
Mr. Audet is well known in telecom circles, and executives I spoke with in the cable industry and finance made a number of points on how the 68-year-old thinks about business. First, they said Mr. Audet – and peers at companies such as Rogers, Quebecor Inc. and Shaw Communications Inc. – are so wealthy that the concept of pulling in more cash is essentially meaningless. Their focus is on legacy, on community, and on building up the business they inherited and handing something better to the next generation.
One cable executive put it this way: As chairman at Cogeco, Mr. Audet is a respected business leader in Canada and a major player in a dynamic U.S. telecom market. Sell the company, and he’s just another old rich guy. Put that way, it’s easy to see why Cogeco said no to a takeover, and why Mr. Audet and his heirs plan to carry on being good stewards of their business.
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