VANCOUVER – The Supreme Court of British Columbia today ruled that Telus’ largest investor, hedge fund Mason Capital Management, cannot hold a meeting of its shareholders to consider a proposal that could have blocked the company's share consolidation plan.
The U.S. hedge fund which held 19% of Telus' voting shares as of March 31, is opposing Telus’ plan to consolidate its voting and non-voting stock on a one-for-one basis.
The Court determined that the actions of Mason were contrary to law and that its proposed meeting and resolutions will not proceed. Telus maintains that Mason’s proposal to exchange non-voting shares into common shares on a one-for-one basis is an attempt to profit from its empty voting strategy at the expense of other shareholders.
Telus says it will proceed with its October 17 meeting where all Telus shareholders will have a vote on the company’s share consolidation plan.
“We firmly believe this proposal 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 Darren Entwistle, Telus President and CEO. “Moreover, this effort is supporting material value creation for our company and both classes of our shareholders.”
Mason Capital Management has responded that it will appeal the decision.
"While we are disappointed by the Court's decision, on a review of the reasons, we have concluded that there are strong grounds of appeal,” said Mason in a statement. It said it be pursuing an appeal on an expedited basis to ensure the matter is decided before the October 17 meeting.
“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. 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.”
Mason added it will vote its shares against Telus' proposal and, “to the extent required, will assert substantial claims available to it and other voting shareholders against the oppressive actions Telus has taken against the class of voting shareholders.”
Telus noted that the Court’s ruling made a number of comments about Mason Capital’s empty voting strategy.
“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. The interests of such an empty voter and the other shareholders are no longer aligned and the premise underlying the shareholder vote is subverted.”
The Court also stated that only Mason stands to profit if the price spread between common shares and non-voting shares increases, and that “only Mason is indifferent to the overall value of Telus itself.”
