The proxy battle at soil clean-up firm Bennett Environmental Inc. ended with a victory for the dissident shareholder group, which has succeeded in removing the company's chief executive officer and most of the board.
Bennett said Wednesday that it has agreed to the changes proposed by Vancouver-based private equity firm Second City Capital Partners - its largest shareholder with a 23-per-cent holding - avoiding a fight on the floor of the annual meeting next week.
Under the arrangement Bennett's proposed board of directors will not stand for election at the meeting, and CEO Jack Shaw will step down, although he will continue to assist the company during the transition. Second City's slate of five directors, including its one representative who already serves on the board, will take over the boardroom.
Lawrence Haber, a lawyer with experience in the financial services industry, will become CEO on an interim basis. He is not a member of the dissident slate of directors, and is independent of Second City, although he did earlier agree to become chairman if the dissident slate was elected. He won't take over as chairman until a new CEO is found.
"We believe that it is in the best interests of Bennett and its shareholders that we set aside our differences with Second City," Mr. Shaw said in a statement.
Jamie Farrar, a Second City managing director who will be keeping his place on the board, said in an interview that the deal allows for a "reasonable transition" and avoids bringing the dispute to the annual meeting.
Second City had said on Tuesday that it had the votes to force the changes if necessary, thanks mainly to the support of I.A. Michael Investment Counsel Ltd., which holds about 18 per cent of Bennett stock and was prepared to support the dissidents.
Mr. Farrar said all of the four new board members are independent from Second City.
The proxy circulars issued by the Bennett and Second City made it clear that the main difference between the two sides was their vision for how the company's $64-million cash cushion should be spent. Bennett had built up the nest egg by carefully managing its costs, and only running its high temperature soil cleaning plant in St-Ambroise, Que., only when it had a stockpile of contaminated soil.
Bennett wanted to use the cash to buy another company in a related industry, while Second City preferred to take a broader view and look at other targets outside the environmental sector.
"We're not as concerned about having to stay specifically in the environmental sector," Mr. Farrar said. "The company has spent close to two years trying to get an attractive transaction in that sector, and wasn't successful … Looking at a broader scope of [possibilities]will probably result in a better opportunity long-term for the company."
He noted that three of the four new board members - Mitchell Gropper, Ian Kidson and Livia Mahler - are executives with considerable experience in completing business deals. The fourth, John Reynolds, is a former environment minister in the British Columbia government.
Analyst Marc Charbin of Jennings Capital Inc. said the new board and management will have a very different attitude than those currently in those positions. Mr. Shaw "had thirty years in the environmental services space and he wanted to stick to his knitting." With him gone, the company's "acquisition criteria has widened significantly," he said.
Still, Mr. Charbin said, the company has a strong cash position, tax losses, and a highly profitable soil-cleaning facility, and that is intact even with "someone new at the tiller."