The Supreme Court of British Columbia has blocked an attempt by activist investor Mason Capital to call a meeting of Telus shareholders, the Canadian telco has said.
Mason said today it will appeal the decision.
The hedge fund wanted to hold the…
The Supreme Court of British Columbia has blocked an attempt by activist investor Mason Capital to call a meeting of Telus shareholders, the Canadian telco has said.
Mason said today it will appeal the decision.
The hedge fund wanted to hold the shareholder meeting on 17 October – the same day Telus has invited for an EGM to vote on the collapse its dual-class share structure.
Mason had called for a separate meeting to vote on a proposal that would guarantee holders of common stock a premium of at least 4.75% more than holders of non-voting stock in the event of Telus successfully mothballing its dual-class structure. However, Telus favours a one-for-one exchange which would see it value both types of share the same.
A bitter feud has been brewing between the operator and the New York investor since spring, when Mason effectively blocked the operator’s first attempt to abandon its two-tier share arrangement through a tactic that Telus described as empty voting.
This is Telus’s second attempt to scrap its share structure, and Mason is again trying to stop the operator. To increase its chances for success, Telus has lowered the approval threshold from two thirds to a simple majority.
“When a party has a vote in a company but no economic interest in that company, that party’s interests may not lie in the wellbeing of the company itself,” said the court, according to a Telus statement.
“The interests of such an empty voter and the other shareholders are no longer aligned and the premise underlying the shareholder vote is subverted.”
Telus’ shareholder meeting will go ahead on 17 October as planned while Mason is yet to comment on the court’s decision.
“We firmly believe this proposal [to abandon the dual-class share structure] is fair and beneficial to all shareholders, is widely supported by shareholders with a true economic stake in our company, and is consistent with the principles of good corporate governance,” said Telus CEO Darren Entwistle. “Moreover, this effort is supporting material value creation for our company and both classes of our shareholders.”
Mason to appeal ruling
In a statement today Mason said it had concluded there were strong grounds for appeal and said it was important the matter was resolved before the 17 October EGM, pledging to fight the share conversion plan.
“We believe it is critical that the owners of the voting shares have the opportunity to vote on a binding change to the company’s articles to establish an appropriate minimum premium to be paid in a dual class collapse transaction,” said the firm in a statement.
“Mason will continue to oppose the actions of Telus aimed at unfairly taking value from the voting shareholders and transferring it to the non-voting shareholders, which include Telus’ board of directors and executive management team, at a 1-for-1 exchange ratio,” it said.
Telus has enlisted the services of Scotia Capital as an independent financial advisor. Scotia said a one-for-one exchange ratio is fair, from a financial point of view, to holders of both common shares and non-voting shares, respectively.
In May proxy advisory firm Glass Lewis came out in favour of the share conversion plan, but said that because common shares historically traded over non-voting shares, they “may recognize some economic shortcomings as a result of the conversion.” However it also said that any short-term costs will be outweighed by the overall benefits of a simplified share structure.
