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Pedestrian is reflected in the window of a Telus shop in Ottawa. (Chris Wattie/Reuters)
Pedestrian is reflected in the window of a Telus shop in Ottawa. (Chris Wattie/Reuters)

Telus asks BCSC to intervene in share fight Add to ...

Telus Corp. has filed a regulatory complaint with the British Columbia Securities Commission related to its proxy fight with a U.S. hedge fund that is trying to defeat its share consolidation plan.

The Vancouver-based telecommunications giant is asking the BCSC, the lead regulator in this case, to force Mason Capital Management LLC to disclose more information about its holdings in Telus and spell out how much money it could make by toppling the plan.

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Since Telus’s share consolidation plan is subject to a shareholder vote at the company’s annual general meeting on May 9, the company has asked the regulator to hold a hearing on the matter as soon as possible, possibly as early as this week. It is unknown whether the BCSC will grant that request. A spokesman declined comment.

Mason, which controls about 18.7 per cent of Telus’s common voting shares, opposes the company’s proposal to eliminate its dual-share structure by converting each non-voting share into a common share on a one-for-one basis. It has argued the voting class deserves a premium because those investors have traditionally paid more for their shares.

In its letter to the BCSC, however, Telus accuses Mason of being “an opportunistic, event-driven New York hedge fund” that has less than a 0.25 per cent net economic interest in the company due to its short trades.

Mason is using a trading strategy that exploits the historical price gap between the two classes of shares. As a result, if it is successful in blocking the deal, the non-voting shares would likely fall, relative to the voting shares, allowing it to make a profit.

Even though Mason has divulged both its long and short positions as required by law, Telus wants the BCSC to force the money manager to come clean about why it acquired its large voting position and what it stands to gain by defeating the proposal.

“Mason must also disclose that as a result of its trading strategy, its interests are different from those of other holders of common shares,” wrote Robert Yalden, Telus’s lawyer, in a letter to BCSC general counsel David Thompson. “Telus shareholders will only be able to make a reasoned judgment about Mason’s opposition to the proposal if they are provided with this information.”

Telus’s plan requires the approval of two-thirds of the votes cast by each class of shareholder, putting Mason in a realistic position to thwart the plan – especially if it has allies among institutional investors or if voter turnout is low.

For its part, Mason dismissed Telus’s regulatory complaint as a diversionary tactic.

“It is unfortunate that Telus continues to try and divert attention from the real issue, which is the value of control. Mason has made numerous disclosures, which make our position abundantly clear,” spokesman Jonathan Gasthalter said in a statement.

Telus’s main beef is that Mason is using a tactic called “empty voting,” which is voting without an economic interest, to defeat the vote – a strategy it claims undermines shareholder democracy.

“In particular, while Mason presents various arguments against the proposal (many of which we submit are misleading), it does not disclose to shareholders that Mason has a material interest in defeating the proposal regardless of the merits of the proposal, as the success of the proposal is the only way in which its trading strategy will not succeed,” added Mr. Yalden in his correspondence with the BCSC.

“Mason is essentially indifferent as to whether the proposal would be in the long-term best interests of holders of common shares.”

As a result, it wants the BCSC to order the hedge fund to provide detailed information including when it first bought or sold voting and non-voting shares along with the number of shares from each class it has acquired since Telus announced the proposal in late February.

Moreover, Telus wants the BCSC to make Mason reveal the number of common and non-voting shares that it intends to vote at the annual meeting and divulge nitty-gritty details about its securities lending arrangements among other information.

Stephen Erlichman, executive director of the Canadian Coalition for Good Governance, declined comment on Telus’ proxy battle with Mason, but said regulators should be cracking down on empty voting in general.

 
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