Telus is taking legal action to block hedge fund Mason Capital from holding a meeting with the telecom company’s shareholders to back a minimum premium for supporting a share consolidation plan.
The Vancouver-based firm (TSX:T) said Friday it will seek a court order to prevent Mason’s Oct. 17 meeting of Telus’ voting shareholders, which it calls undemocratic and invalid under Canadian law.
Telus said the British Columbia Supreme Court will consider the matter next Thursday and Friday.
Both Telus and New York-based Mason are in a battle over converting the telecom company’s dual share structure of voting and non-voting shares into one class of common shares.
Adding to the conflict is Mason’s decision to hold its meeting on the same day as Telus planned to meet with both classes of shareholders to vote on a proposal to combine its voting and non-voting shares into one class of stock.
“It’s really a ridiculous attempt,” Telus’ chief financial officer Robert McFarlane said from Vancouver. “It creates confusion to shareholders.”
“We expect to strike it down in court and go ahead with our meeting,” McFarlane said. But shareholders, including Mason, can have resolutions put on the Oct. 17 meeting’s agenda.
Telus said its non-voting shareholders can’t be excluded from the plan to convert the company’s stock into one class of common shares.
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Mason owns slightly under 20 per cent of Telus’ voting shares. It is proposing a minimum premium valuation of either 4.75 per cent – which represents the historic average trading premium of the voting shares over the non-voting shares – or an enhanced minimum premium of eight per cent to support one class of shares.
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Telus has said the share conversion will take place on a one-to-one ratio and there will be no premium for voting shareholders under the plan.
By accumulating almost a 20 per cent stake in Telus in common stock while at the same time short-selling nearly the same amount of non-voting and common Telus stock, Mason was able to vote nearly $2 billion worth of stock with only a $25-million net economic stake, Telus has said.
The hedge fund said Friday that non-voting shareholders can attend the meeting but won’t be able to vote.
Mason co-founder Michael Martino said that he wants to protect the rights of Telus’ voting shareholders. He aims to establish a minimum premium to be paid to voting shareholders in any transaction to have one class of shares.
“Given the oppressive actions taken by Telus to disenfranchise an entire class of shareholders, it is critical that voting shareholders have the opportunity to vote on a binding change to Telus’ articles to establish an appropriate minimum premium to be paid in any dual-class collapse transaction,” Martino said in a statement.
Mason said Telus has refused to meet its request for a meeting.
“Moreover, Telus’ recycled proposal demonstrates the lengths the company is willing to go to circumvent the protections afforded to the voting shareholders under the law,” it said.
“Mason will continue to vigorously oppose Telus’ latest attempt to take value from voting shareholders and transfer it to non-voting shareholders, who include Telus’ board of directors and company executives, whose personal economic interests are directly tied to the non-voting stock.
McFarlane said with one class of common Telus shares would mean more trading volumes, liquidity and marketability and Telus common shares would be listed on the New York Stock Exchange for the first time.
“Mason’s resolutions would take away key benefits for all shareholders that would result from approval of Telus’ proposal to collapse its dual-share classes,” McFarlane said.
The telecom company first introduced its share-conversion plan in February, but withdrew the proposal right before its annual meeting in May when it became apparent it wouldn’t pass.
At the Oct. 17 meeting, like the one in May, Telus will need to garner two-thirds support from non-voting shareholders. However, the threshold for voting shares has been lowered from two thirds to half, which should make it more difficult for Mason to block it again, Telus has said.
Excluding Mason Capital, proxies representing about 92.4 of Telus shares were cast in favour of the Telus proposal in May, the telecom company recently said.
Share in Telus closed down $1.58, or 2.5 per cent, on the Toronto Stock Exchange. Non-voting shares closed down 74 cents, or 1.2 per cent, on the New York Stock Exchange.
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