Mason Capital lost an appeal Tuesday in its fight with Telus Corp. over the telecom company’s move to a single class of common shares.
In striking down the appeal and approving the one-for-one share conversion plan, the B.C. Supreme Court took note of the New York-based hedge fund’s so-called empty voting tactics to block the conversion of voting and non-voting shares in Telus.
Mason’s opposition to the plan must be viewed through the “lens of its unique strategy,” which had nothing to do with the well-being of Vancouver-based Telus and its shareholders, Justice Shelley Fitzpatrick wrote in her decision.
“It can hardly be overstated that the contention by Telus that Mason is an ‘empty voter’ in this and prior proceedings has infused much of the tenor in the contest between them,” Fitzpatrick wrote.
“Mason rails against this pejorative moniker. Whether one accepts that name or not, it seems that, at best, one could describe Mason as an ‘opportunistic investor.’”
Telus could not be reached for comment but has criticized Mason for empty voting, which is a legal investment strategy.
By accumulating an 18.7-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 B.C. Supreme Court upheld an earlier ruling that cleared the way for Telus to hold a shareholder meeting to vote on the plan, which was approved by shareholders in October.
“Mason stands alone and its submissions are clearly directed at the benefits it alone will achieve by defeating the arrangement,” the decision read.
“I conclude that the terms of the arrangement are fair and reasonable,” the judge wrote in approving the share conversion plan.
The battle between Mason and Telus has been going on since the spring. Mason Capital repeatedly said holders of Telus’ voting shares should get a premium to approve the share conversion plan.
The New York-based hedge fund had proposed 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 a minimum premium of eight per cent.
Tuesday’s decision noted that Mason can appeal the ruling. Mason Capital had no immediate comment.
The B.C. Supreme Court also noted that aside from Mason Capital, the overwhelming majority of both common and non-voting shareholders supported the share conversion plan.
Telus had two classes of shares to comply with Canada’s foreign ownership rules for big telecom companies, which don’t allow such ownership to exceed 33.3 per cent. U.S.-based telecom Verizon sold its last stake in Telus in 2004.
Telus has said the dual-share structure posed corporate governance issues and reduced share liquidity. Historically, the common shares have traded at a premium to the price of the non-voting shares.
Last month, Telus said foreign ownership of its common shares had been cut in half, leading the telecom company to believe that Mason had reduced its stake in the company.
Telus said the non-Canadian ownership of the company was roughly 15 per cent as of Nov. 16, down from almost 33 per cent last summer.