Act II From the backwoods to the boardroom
The scene slowly emerges to the dulcet tones of Richard Strauss’s Also sprach Zarathustra. Appropriately, John Risley (a wellknown Canadian businessman who has been described as the “northern Rockefeller”, with major investments in the food supplements, fisheries and communications sector) commences his voiceover as the thrum of the string section begins to abate.
“I first met Brendan when I was trolling for candidates for the board of Fishery Products International (FPI) in 2001 as I was trying to change that board,” says the president and CEO of Clearwater Fine Foods Inc. He is referring to his archly controversial, hostile takeover of St. John’s-based FPI, a move that for many Newfoundlanders — including many elected representatives — was tantamount to trampling on the provincial flag. “Candidates for the board had to be from Newfoundland, be credible, and be prepared to take the flak for taking on the ‘establishment’. Brendan said ‘yes’ in a heartbeat.”
As Paddick picks up the story, it’s clear there was nothing brash or impetuous about his decision. “I remember challenging John on how he thought he could operate FPI better,” he says. “His answers surprised me as they were all based on investments in capital and technology. FPI had some 12 fish plants in operation at the time, most of them operating seasonally for only a few months of the year, and all of them in towns where we offered cable TV service. I saw this as an opportunity to kill many birds with the one stone: turn around FPI, provide higher-value full time jobs, invest heavily in advanced technologies to transform the Newfoundland fishery, create economically vibrant communities and in the process, increase the potential growth trajectory of our own company.”
John Risley: “You can imagine I was impressed by Brendan’s courage, self-confidence, ballsy response. We became friends.”
Paddick will soon need a friend like John Risley. In 2004, three years after his introduction to the power-politics that was FPI, the burgeoning telecom tycoon is emerging from one of the toughest few months of his own executive life — an executive life that had started auspiciously enough; if not exactly orthodoxically.
Number of towns Paddick visited that year
Brendan’s voiceover continues: “After my stint of door-to-door sales in the mid-1980s, N1’s founder Phil Keeping called me into his office after the first round of 151 towns were done. I assumed that he was going to offer me a position, like vice-president of marketing or something similar. I was probably only 23, maybe 24, at that time. But what he said was, ‘Lookit, the CRTC just awarded me some new licenses for more small towns, but this time they are really small. So we were wondering if we were to buy you a trailer, would you tow it behind your truck and stay in the trailer instead of hotels? We really gotta keep costs down.’ Uh. . .that was an extremely demoralizing day in my life.”
Fortunately, then as now, a day only lasts 24 hours. The young Paddick knows, in his core, that eventually he will have his chance.
The scene dissolves into a frantic montage of images: telephones being dialed, boardroom doors opening and closing, executives glad-handing each other, airliners ascending from and descending onto tarmacs. Finally, the 20-something Brendan sits quietly in the outer offices of one Gary Kain, the Oakville, Ontariobased chairman of the company that owns N1 and a clutch of other regional, rural cable providers across Canada and the United States.
“The guy who had been hired to run N1 had just given his notice,” Paddick recalls. “So, I used my Aeroplan points and caught the first flight to Toronto to talk to Gary. I gave him my pitch. I told him that I had been in every household on (my route) in rural Newfoundland, and that I knew what made those customers tick. The meeting took maybe two or three hours and when we were done I was back on a plane to Newfoundland the same day as N1’s new president.”
Flash forward to 1992, two years before the group (apart from the Newfoundland division) tumbles into trouble. As Paddick recounts, it’s make or break time.
The CEO of the organization that owned N1 wanted to centralize all functions, a move which N1’s leader thought undermined their rural cable communications business model. Says Paddick: “I remember telling Gary Kain one day that if this guy isn’t road kill on the highway to decentralization, we’re going bust. That year, we had a net loss of $29 million on $39 million of revenue; a neat trick. And he said… I’ll never forget it… ‘Would you be willing to raise your concerns with the board?’ Now, normally, that would have been a very career-limiting move to, you know, go in and talk about your CEO in that way, but I did.”
In 1994, at the age of 28, Paddick becomes the group’s operational head honcho, with direct responsibility for divisions in seven provinces, 1,200 communities across Canada and a bevy of towns in 28 American states. And the camera virtually kisses the ground on which he treads.
Shoot 1: Here’s the young cable maestro taking names and kicking ass, selling off U.S. holdings, which are ritualistically bleeding red ink, as fast as he can find buyers.
Shoot 2: Here’s the former doorknocker simultaneously cutting costs and reconstructing, as he says, back to the group’s “core competencies” in underserved markets.
Shoot 3: Here’s the hot shot switching up names and corporate brands — from N1 to Regional Cable TV to Regional Cablesystems to, finally, Persona Communications Inc.
Shoot 4: Here’s the executive — whose grandmother, a homemaker with great reserves of common sense, once told him that everything in life is about sales — plotting the strategic next steps for the company he is steadily guiding from the brink of insolvency to reliable profitability.
Persona went public in 1998 following its acquisition of Northern Cable, a move which basically doubled the size of the company. John Risley became one of the largest shareholders.
Next up: a growth-through acquisitions buying spree. “I think we did some 50 deals over the space of four or five years, ranging from very small ones to ones worth over $100 million,” says Paddick.
Despite these aggressive moves, as the 21st Century dawns, Paddick continues to fret about the company’s prospects. He worries, in particular, about new competitive threats, such as satellite TV providers, Shaw Direct and Bell ExpressVu. “In the early years, they were just stumbling along,” he says. “But I knew that with their balance sheets they would eventually get it right and that they would become pretty formidable competitors. And here we were sitting in 1,200 rural communities in seven provinces, with technology that would need significant capital investment to compete.”
Running fibre to connect these rural systems together to create scale and efficiencies was really not an option as many were hundreds of kilometres apart. Persona had 650 technical sites spread out across Canada. It would have cost them about $5,000 at each site (over $3 million across their network) to add a single new TV channel. Their competitors only needed to invest that $5,000 once. “With hundreds of new channels on the horizon, rather than being a perennial cash cow, we were about to morph into a capital pig,” notes Paddick.
He begins to nose around the corporate landscape for a new opportunity that will enhance Persona’s position in an increasingly competitive industry — preferably in an emerging market where, he says, “we could put to work the skills we had developed in acquiring cable systems and integrating them into a business with scale.”
In 2002, he settles on the Caribbean and buys a company there called Cable Bahamas, which had been established by his longtime mentor Phil Keeping, the same man who had hired him to sell cable packages door-to-door in rural Newfoundland. “It was,” he says, “supposed to be a stepping stone to a new regional market. . . Unfortunately, not everyone agreed.”
The scene now turns angry as the camera captures all the finger-pointing signs of a bonafide shareholder revolt at Persona. Though Risley, the man with the single biggest personal stake in the company, welcomes the idea of market expansion, others are decidedly opposed to the notion. Matters come to a foaming head at the company’s 2003 annual general meeting.
“A few shareholders accused us of losing our focus,” Paddick says. “I guess they were thinking that I was off on a beach somewhere sipping drinks with umbrellas in them. At any rate, this led to the addition of several new board members who quickly forced a ‘review of strategic options.’ All that really meant was: sell the company.”
Faced with few options, Paddick does just that in 2004, unloading Persona on the Dallas-based private equity firm Hick Muse Tate & Furst for a cool $407 million. As a shareholder, he makes money on the deal. But, he’s not happy — not by a long shot.
“That was a difficult time,” he recalls. “Essentially, you take a company you were named CEO of at 28. You turn it around, take it public, grow it to become very profitable (at the time, Persona had the highest operating margins of any publicly traded telecom company in Canada), identify future risks to the business, start looking for a new growth engine, identify one, and execute on that plan. Then one or two shareholders make enough noise to spook people into a process. And you end up selling the company… I was pretty jaded by the whole experience and I thought I would take some time and maybe even change careers or industries.”
The gloomy thoughts don’t last long. He realizes that Cable Bahamas remains in play. The fund Hick Muse Tate & Furst is using to hold the Persona assets is restricted only to North American investments. That means, for the right price, the Caribbean venture might just be feasible after all. He remembers that Risley had expressed an interest in partnering up with him on any future undertaking that seemed promising. Paddick, now energized, makes the call.
The scene turns frantic with purpose, as the camera records the telecom entrepreneur’s Hail-Mary hustle and Risley’s rumbling voiceover describes the action: “We had decided what our launch had to be. We originally thought it (Cable Bahamas) carried a price tag of US$35 million. At a dinner in Toronto, it became apparent that it was going to be US$50 million, and I went home angry and disappointed. Brendan told me it was 50 or we weren’t going to get going, so I agreed.”
In fact, says Paddick, joining the narration, “Risley actually wired US$50 million to my personal chequing account in the Bahamas without a piece of paper, a demand note or a lawyer involved. We closed the deal after regulatory approvals in February 2005 and the rest is history.”
Act II winds down as the camera joins a smiling Paddick on a sunny, tropical beach, somewhere north of the equator.