Canadian incumbent Telus has resurrected its proposal to abolish its dual-class share structure which failed earlier this year.
Currently Telus’ has two types of share, one with voting rights and another without. The operator plans to convert…
Canadian incumbent Telus has resurrected its proposal to abolish its dual-class share structure which failed earlier this year.
Currently Telus’ has two types of share, one with voting rights and another without. The operator plans to convert non-voting shares into common shares on a one-for-one basis subject to a shareholder vote.
The company had announced plans to merge its different types of shares earlier in the year but the plan fell apart due to resistance from activist investor Mason Capital, a New York-based hedge fund.
Now Telus has lowered the threshold of shareholder support required to convert the stock to a simple majority – previously it was two thirds.
Shareholders will vote on the matter on 17 October.
Mason is the telco’s single biggest shareholder owning roughly 20% of the stock with the vast majority of its shares carrying voting rights.
Telus said that Mason blocked the vote in May by “empty voting” and accused the hedge fund of voting US$1.9bn worth of its common shares with only an estimated US$25m net economic stake.
Mason opposed the earlier share conversion plan arguing that Telus common shares have historically traded 4%-5% higher than the non-voting shares and therefore it should be compensated by Telus. Mason says if the two different classes of shares are being merged the voting shares will become less valuable and Mason will incur a short-term loss.
“With this proposal we are responding to the overwhelmingly positive support from shareholders since we introduced our first proposal to convert non-voting shares into common shares in late February,” said Telus CEO Darren Entwistle.
“Excluding Mason Capital, proxies representing 92.4% of total shares received were in favour of our first proposal before we withdrew it in May,” he said.
“At that time we pledged to introduce another proposal for a one-for-one exchange in due course, and we are fulfilling that promise with today’s announcement.”
Mason has come out against the new proposal and accused the telco of trying to bypass the wishes of voting shareholders.
Telus rejects Mason’s shareholder requisition
“Telus’ new proposal to collapse the shares on a one-for-one ratio is the very same proposal that was rejected by shareholders a few short months ago, except that Telus appears to be attempting to circumvent the protections afforded to the voting shareholders under the law,” said Michael Martino, principal and co-founder of Mason Capital.
Telus said it also rejects a proposal made by Mason earlier this month to change the company’s rules that, if implemented, would preserve a higher valuation for voting shares.
The hedge fund had proposed that if Telus tried to eliminate the dual-class structure again, holders of voting stock should get a guaranteed premium of at least 4.75% more than holders of non-voting stock.
Telus said its board of directors had reviewed the requisition and found it anti-democratic and invalid.
“Simply put, Mason’s request would have imposed constraints on non-voting shares without giving holders of those shares a say. That is simply wrong,” said chair of Telus’ board Brian Canfield.
In response Mason has said it stands by its requisition and said that voting shareholders of Telus, who had paid a premium to be able to vote, should have the opportunity to vote on changing the company’s rules.
“Mason and its counsel anticipated that Telus would attempt to frustrate this proposal by falsely claiming that the non-voting shareholders are also entitled to a vote,” said Martino.
“Mason will take appropriate steps to see its requisition through.”
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