A proposal to take satellite radio provider Sirius XM Canada Holdings Inc. private has won shareholder approval, despite months of vocal opposition from dissident investors.
Nearly 66 per cent of minority shareholders supported the transaction at a subdued, 14-minute meeting held Tuesday morning at the TMX Broadcast Centre in downtown Toronto. Should the deal close, U.S.-based Sirius XM Holdings Inc. – the parent company of the satellite radio brand – would own most of the Canadian company’s shares.
Two Canadian investors, Slaight Communications Inc. and Obelysk Media Inc., would each own 33.5 per cent of Sirius XM Canada’s voting shares, to keep the company onside with foreign ownership restrictions. The company’s other large shareholder, the Canadian Broadcasting Corp., is cashing out its 12.5-per-cent stake.
The vote was expected to be divided as the proposed deal faced resistance from the start. A group of minority shareholders holding a total of 8.4 million shares argued the offer of $4.50 per share undervalues the company by a wide margin, and complained to securities regulators that they were the victims of “coercive” tactics designed to justify a lower offer price.
The company’s board recommended the deal, and management maintained in a series of statements that the offer is fair.
“There’s some that may not fully realize the value that this transaction holds,” said Mark Redmond, president and chief executive officer of Sirius XM Canada, in an interview. “But we’re really pleased with the [66 per cent] vote in favour.”
Shareholders keeping an interest in the company were excluded from the minority vote, but with their votes counted, the transaction had 89-per-cent support. Yet dissenting investors made the case to the Ontario Securities Commission that the CBC’s votes should also have been excluded from the tally of disinterested shareholdders on the basis that it benefits from an ongoing programming partnership with Sirius XM Canada. Had the CBC’s votes not counted, all else being equal, the vote would not have passed.
“It’s somewhat disappointing but not that surprising. Many people would have expected it to pass with the CBC being included in the vote,” said Andrea Horan, portfolio manager at Agilith Capital Inc., one of six independent investment managers that joined forces to publicly push back against the terms of the deal. “I think that we did not get fair value for the asset that we owned, and that’s the way it goes.”
The dissident group also argued that a valuation the company’s board relied upon in recommending the transaction was flawed. The dispute was further complicated when two independent shareholder services firms – ISS and Glass Lewis – released separate opinions that reached opposite conclusions. Where Glass Lewis encouraged shareholders to support the deal, ISS urged that they vote against it.
At issue is Sirius XM Canada’s close and unique relationship with the American Sirius XM, from which the Canadian company licenses some 90 per cent of its content, and gains access to new technology. Management warned that there was a real chance the renewal of licensing agreements could lead to the Canadian company paying significantly higher royalty rates in future, jeopardizing its otherwise solid financial outlook.
“I’m not going to say anything’s impossible, but it made it very, very difficult for us to deal with any other possible buyer,” said Tony Viner, chair of Sirius XM Canada’s board of directors.
The transaction still needs approval from the courts and the Canadian Radio-television and Telecommunications Commission.Report Typo/Error
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