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Dissident shareholders poised to unseat Bennett board Add to ...

A dissident shareholder group that is trying to install a new board at soil clean-up firm Bennett Environmental Inc. says it has enough votes to stage a coup at the company's annual meeting next week.

Second City Capital Partners, a Vancouver private equity firm run by financier Sam Belzberg, disclosed Tuesday that it has received proxies for more than half of Bennett shares, giving it the clout to elect a replacement slate of directors.

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This is the second time Second City has tried to shake up the boardroom at Bennett, which was once a stock market favourite with a share price above $28, but has struggled in recent years.

Five years ago, just as Bennett was recovering from a series of regulatory allegations that it gave misleading disclosure about a large U.S. contract, Second City demanded and got board representation after it accumulated 11 per cent of the company's stock.

The board membership has changed since then, and Second City now has only one director in place. But it is again demanding that the board be revamped with its own nominees, and it wants chief executive officer Jack Shaw replaced.

Second City holds about 23 per cent of Bennett's shares, and is supported by the second biggest shareholder, I.A. Michael Investment Counsel Ltd., which holds about 18 per cent. With other proxy votes it has received, Second City says it is in a majority voting position at the annual meeting set for June 29 - although some shareholders could still change their votes before then.

The main flashpoint between Second City and Bennett management is the use of the $64-million in cash the company has built up in the past few years. By running its high temperature soil clean-up plant in St-Ambroise, Que., only when it has a stockpile of contaminated soil, Bennett has kept tight control of its costs and has been able to save cash.

In its proxy circular, Second City said Bennett management and the current board has "wasted time and money pursuing numerous unsuitable acquisitions," and it alleged that the company tried to set up a stock option scheme that was unfair to shareholders.

"What's bothering us is we've had money in the bank there for the first time in a long time … and management and the board have not come up with anything to do with it that makes any sense," Mr. Belzberg said in an interview. "We're not in a big rush to do anything, but we sure would like to look at some opportunities."

But Mr. Shaw, the CEO, said Mr. Belzberg has tried to pressure the company into making speculative deals, including one that would have involved investing in one of Second City's portfolio companies. Mr. Shaw noted that he and his team have cut costs, settled litigation, lined up new contracts and moved the company's share price from just pennies a share in 2006 to more than $2 now.

In the circulars sent to shareholders, and a variety of other releases, the two sides have turned the proxy battle into a nasty fight. Mr. Belzberg accused Mr. Shaw of making "false, outlandish and misleading statements." Mr. Shaw accused Mr. Belzberg of a "blatant attempt to manipulate shareholders with misinformation" while trying to "hijack" the company.

Late last week the dispute spilled over into Ontario Superior Court. Jamie Farrar, Second City's sole representative on the current Bennett board, asked a judge to block any attempt by the other directors to issue a special dividend to shareholders, a move that would deplete the cash position. The judge refused to issue an injunction, but said the matter could be reviewed if the board does issue a dividend.

Second City said it will return to court if the board tries to make a payout before the annual meeting.



With files from Boyd Erman

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