TORONTO – Soil treatment company Bennett Environmental Inc. (TSX:BEV) has agreed to demands from its biggest shareholder for wholesale changes in its board of directors, including the removal of president and chief executive Jack Shaw.
“We believe that it is in the best interests of Bennett and its shareholders that we set aside our differences with Second City (Capital Partners Inc.),” Shaw said in a release announcing the deal.
“With that objective in mind, Bennett and Second City will prepare for a transition at the board level.”
Under the agreement, the slate of nominees proposed by Bennett in its management information circular on June 1 will not stand for election at the company’s annual and special meeting June 29.
In addition Shaw “will step down at the AGM (annual general meeting), while continuing to provide assistance to the company during the transition,” the release said.
Second City chairman and president Sam Belzberg, said he was “confident that the company will continue to progress under the governance of a new board.”
Belzberg announced that Lorie Haber, who was not a member of the dissident board slate proposed by Second City, had agreed to serve as CEO on an interim basis after the June 29 meeting.
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Haber, who will assume responsibility for operations and evaluating strategic options, had previously agreed to accept the appointed position of chairman in the event the dissident slate was elected but will now defer assuming that role until his responsibilities as CEO are concluded.
In the interim, the Bennett board will elect an independent lead director.
Previously, Second City had nominated candidates to replace four of five members of the Bennett board.
Now only one of the nominees, current board member and Second City managing director Jamie Farrar, is being put forth by the private equity company. The other four nominees, all independent of Bennett and Second City, are Mitchell Gropper, Ian Kidson, Livia Mahler and John Reynolds.
Prior to Wednesday’s announcement, the current Bennett board appeared headed for a court fight over its plan to declare a special dividend of 90 cents per share in an attempt to win over shareholders in the proxy fight. The dividend would have used up $35 million of the company’s $64 million in cash reserves.
Farrar attempted to block the dividend in the Ontario Superior Court of Justice. Although the court refused to issue a restraining order to prevent the dividend, Second City said it would support any renewed legal challenge by Farrar once the dividend was declared.
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The private equity firm also said it had advised certain Bennett directors that if they voted in favour of the dividend declaration ahead of the company’s annual meeting it would hold them personally accountable “for damages on behalf of all shareholders for their oppressive conduct.”
“There is simply no good business reason for Bennett to pay a dividend at this time and many reasons why it is not in the best interests of shareholders,” Farrar said.
“If the other three … of the board declare a dividend, it would just be a scorched earth effort to weaken the company before they are voted out by shareholders next week,” he said.
Farrar also said any dividend at this time would reduce Bennett’s attractiveness as an acquisition target, as well as impede it from using cash to fund acquisitions.
The company posted a loss of $1.8 million or five cents per share in its first quarter as its high temperature soil treatment plant in St-Ambroise, Que., remained closed in order to build up its inventory of material to process.
Meanwhile, it announced in April that it would sell its ill-fated soil-treatment facility in Belledune, in northeastern New Brunswick.
The plant was built, despite local protests, at a cost of $29.3 million, but never got into full production. The fatal flaw was a lack of contaminated soil to process after Bennett failed to win a major U.S. contract and government funds for such projects dried up.
Bennett shares were up nine cents, or more than four per cent, at $2.19 early Wednesday afternoon on the Toronto Stock Exchange.
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