Published on: 12th Sep 2012
Canada’s Telus says that it has secured a court victory blocking a USA based Hedge Fund from holding a rival shareholders meeting to discuss alternatives to its plans to clean up the company’s differing classes of shares.
Telus says that the Court determined that the actions of Mason Capital were contrary to law and that Mason’s meeting and resolutions will not proceed.
Telus has two classes of shares as a legacy of its former merger between BC Telecom and Telus Alberta, some of which offer voting rights and another class which doesn’t permit votes at shareholder meetings.
The decision to create two classes of shares was to get around Canadian rules limiting foreign stakes in local telecoms companies, and at the time, USA based Verizon owned a sizeable stake in the merged company. Verizon (GTE as it was then) has since sold its stake.
Telus now wants to merge the two classes of shares, which is normally considered good corporate practice.
However, the proposal merges the shares at equal value, and Mason Capital Management has argued that voting shares are worth more – and the proposal should reflect that. The key is that if Mason’s proposal was accepted, then it would see its common shares converted at a premium of 4.75-8% and be able to profit on that difference.
The Court made a number of comments about Mason Capital’s empty voting strategy, including: “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.”
Telus will proceed with its meeting October 17 where all Telus shareholders will have a vote on the company’s proposal to exchange its non-voting shares into common shares on a one-for-one basis.
Telus currently has approximately 175 million common shares and 151 million non-voting shares. Upon approval, shares will also be listed on the New York Stock Exchange (NYSE) for the first time.
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