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Why Péladeau should release control of Quebecor’s media arm

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Pierre-Karl Péladeau's father, Quebecor Inc. founder Pierre Péladeau, died on the job in December 1997, leaving behind a legacy as one of Quebec's most successful entrepreneurs but not exactly that of a great family man. With his resignation Thursday as CEO of the company his father created, PKP – who's still in his early 50s – has a chance to cement his legacy as a devoted father of three and husband, something he admitted Wednesday has come second to his business career. Unfortunately for PKP, he leaves behind a more checkered legacy as CEO of the company he controls. If Robert Dépatie, PKP's successor, expects to fare better, he will have to make some tough decisions. Mr. Dépatie's 's toughest may be convincing PKP to give up the one task he's kept for himself.

PKP started as a brash, overbearing and impatient force in the business world, fighting with rivals, ex-employees, regulators and fellow directors. He famously overpaid for Quebec cable company Videotron ltee, and presided over the steady decline of printing arm Quebecor World, holding fast until it slid into creditor protection rather than sell to willing bidders. With the exception of two brief periods during the Internet bubble and in 2007, it was only this year that Mr.  Péladeau could claim Quebecor stock was worth more than when he took over.

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Over the years, Videotron emerged as the value driver of the company – largely due to the leadership of the talented and well-regarded Mr. Dépatie. It is a credit to Mr. Péladeau that he recognized the importance of stepping aside rather than risking Mr. Dépatie leaving for a CEO job elsewhere (including the one that will soon open up at Rogers Communications Inc.). Mr. Dépatie, who formerly held senior jobs in the food distribution business, oversaw the transformation of Videotron from primarily an analog cable-focused firm into a digital cable and Internet powerhouse in Quebec and, since 2010, a player in the local telecom market, leading the division of Quebecor that saw the most earnings growth. He also improved customer service and rebuilt employee relations after a prolonged strike at the cable company in 2002.

Mr. Dépatie's challenge is that he is inheriting a company whose businesses are overly focused on one market – Quebec – and that are either in decline or face limited long-term growth prospects. Fourth-quarter results released Wednesday show continuing deterioration in the company's Sun Media newspaper business, its chains of video rental, book and music retail stores, and its TVA broadcasting arm. Meanwhile, the aforementioned growth that Mr. Dépatie oversaw in three of Videotron's key businesses – digital cable, cable Internet, and cable-based telephone services – is now slowing. For the first time since 2003, increases in digital cable subscribers last year was not enough to offset declines in analog cable. While the company added 112,000 wireless phone subscribers in 2012, additions were down from 154,500 the year before.

A changing of the guard often heralds an opportunity to make tough decisions about strategy. A new CEO with fresh ideas ought to ask why Quebecor's business is so Quebec focused, whether it should merge its cable assets with those of Rogers, or cut the company's losses and sell its newspaper chain, retail stores, redeploying what little value it can get into more promising ventures.

Unfortunately for Mr. Dépatie, Mr. Péladeau, in his new role as chairman of the board of the company's key Quebecor Media subsidiary, will continue to oversee the corporation's "strategic files." While it's reasonable to expect that Mr. Péladeau would keep a watch over the asset he still controls, it is in the interests of all shareholders that he loosen the grip on his one last task and see what the new generation of management can do to take Quebecor forward. The last thing he or any other investor wants is to see its patient CEO-in-waiting transform into the frustrated CEO whose boss couldn't let go.

Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff.

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About the Author

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More

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