VANCOUVER – Telus says it continues to receive the backing of proxy advisory firm Institutional Shareholder Services Inc. (ISS) in its ongoing battle fight with U.S. hedge fund Mason Capital. Over the weekend Mason issued a news release that claimed the ISS had reversed its previous position and was no longer in favour of Telus’ share consolidation plan.
“The ISS report recognizes – and agrees with – Mason’s core arguments: that the voting shares are of greater value than the non-voting shares, and that Telus’ proposed one-for-one exchange ratio dilutes voting shareholders’ voting rights and transfers the premium they have paid for to the non-voting class,” said Michael Martino, Mason’s principal and co-founder in a statement.
But Telus has countered the claim by providing a quote from ISS that states it backs Telus’ proposal that non-voting shares be exchanged for common shares on a one-for-one basis.
“This proposal represents another meaningful step forward in the company's governance regime, in resuscitating the principle that voting rights should be commensurate with economic interest…As the proposed transaction continues to align voting rights with economic interest, offers shareholders meaningful economic opportunity through increased trading liquidity and a dual listing on the NYSE, and has been ratified by a strong market response – and as the company's Articles effectively preclude any exchange ratio other than the proposed one-for-one exchange – a vote for the proposal is warranted,” writes the ISS in the quote supplied by Telus.
Darren Entwistle, Telus President and CEO said the recommendation from ISS “a trusted neutral expert on corporate governance and proxy voting confirms that Telus' proposal is fair and beneficial to all shareholders, and is consistent with the principles of good corporate governance and shareholder democracy,.”
"We ask all of our shareholders to support our proposal, casting their votes for good governance and the value-creating benefits fostered by collapsing our share structure into one class of shares."
Telus notes that both ISS and Glass Lewis & Co., another proxy advisory services firm, recommended twice before (in initial and updated reports) they were in favour of a similar proposal Telus put forward earlier this year. Prior to withdrawing its previous proposal after Mason objected, Telus said it had the “overwhelming support of its shareholders – excluding Mason, 92.4 per cent of total shares received were in favour of the proposal. This latest recommendation from ISS represents the third time it has supported Telus' objective to move to a single class of outstanding shares via a one-for-one exchange ratio.”
At the upcoming Telus meeting on Oct. 17 the telecom will need to win two-thirds support from non-voting shareholders, but only needs the approval of half of the voting shares to have its share consolidation plan approved.
Earlier today, Telus sent a letter (a portion of which can be viewed below) to shareholders asking for their support in voting for its proposal. Telus says it sent the letter in order to correct “misinformation and self-interested advice” sent to shareholders earlier this week by Mason Capital.
Dear Fellow TELUS Shareholder,
We are writing to ask you to please vote FOR TELUS' share exchange proposal. We put this proposal forward to address concerns our shareholders have expressed about the adverse impact of our dual class share structure on liquidity and trading volumes. We believe our proposal addresses these concerns and is beneficial and fair to holders of both common and non-voting shares.
TELUS' proposal provides significant benefits for all shareholders
If approved, our proposal would provide these benefits:
• Increased liquidity and marketability of TELUS' common shares for the benefit of all shareholders -Today, TELUS has approximately 175 million common shares and 151 million non-voting shares. Approving the proposal would result in one much larger common share class of approximately 326 million shares being available for trading, which makes our shares potentially more attractive to larger institutional investors. In addition, there would be an 85 per cent increase in the amount of TELUS common shares available to be purchased by non-Canadian investors and the common shares would be more marketable as they would be listed on the New York Stock Exchange for the first time.
• Increased value to both classes of shares – The value of our common and non-voting shares immediately jumped in value on the initial announcement of our share conversion proposal last February and since then have appreciated to levels beyond that of the overall market index and TELUS' peers. The shares are up 11 per cent and 14 per cent respectively for the period February 21, 2012 (the date we first announced our intent to combine our share classes) through to the end of September, despite the Toronto Stock Exchange index being down by more than two per cent during this same period.
• A capital structure aligned with best practice – Moving to a single class of issued and outstanding common shares would align TELUS' capital structure with what is generally viewed as best practice where all shares have one vote each.
• Fairness – Granting the right to vote to the holders of non-voting shares would enhance TELUS' leadership in respect of good corporate governance practices. Holders of our non-voting shares already have the same economic interest (such as the same dividend rights) as the holders of our common shares.
• A "one share – one vote" principle is strongly endorsed by the Canadian Coalition for Good Governance.
• Scotia Capital's fairness opinion concluded that the one-for-one-exchange ratio is fair, from a financial point of view, to common and non-voting shareholders, respectively.
Independent leading proxy advisory firm, ISS, recommends both classes of shareholders vote FOR this proposal.
Institutional Shareholder Services Inc. (ISS), a leading independent global proxy advisory services firm, has stated, "As the proposed transaction continues to align voting rights with economic interest, offers shareholders meaningful economic opportunity through increased trading liquidity and a dual listing on the NYSE, and has been ratified by a strong market response – and as the company's Articles effectively preclude any exchange ratio other than the proposed one-for-one exchange – a vote FOR the proposal is warranted."
