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Canaccord is the country’s largest independent investment dealer.Lyle Stafford/The Globe and Mail

In a rare takeover twist, a major investor in Canaccord Genuity Group Inc. CF-T is attacking board members who are out to win a better deal for all shareholders in the investment bank.

What started in January as a straightforward negotiation between buyer and seller is now a bare-knuckles battle between a Canaccord management team that wants to acquire the Toronto-based company for as little as possible – they are offering $11.25 a share, or $1.1-billion – and a board committee charged with getting the best possible price for the country’s largest independent investment dealer. It’s all deeply personal, with the fight pitting former colleagues and friends against one another.

The gloves came off late Tuesday, when Bermuda-based fund manager Skky Capital Corp. Ltd., which owns an 8.8.-per-cent stake in Canaccord, launched a campaign to replace the board’s four-member special committee. Skky, controlled by Winnipeg native Gordon Flatt, argued the Canaccord committee’s attempts to find a better offer – potentially by selling off part of the business – puts the $11.25 management bid at risk.

To lead its search for alternative deals, Canaccord’s committee recently hired investment bank Barclays Capital Canada Inc., a decision that Skky also opposes. In a news release, Skky said: “We have lost confidence in the special committee.”

Skky wants to replace all four independent directors on Canaccord’s committee, including committee chair Jill Denham. In their place, Skky will nominate two candidates, former Canaccord director Terry Lyons, age 73, and Swedish investor Lars Rodert, who used to work at Toronto-based investment bank Gordon Capital Corp. Skky, working with law firm McMillan LLP, is pushing for a meeting by May 10.

Skky’s decision to challenge the board is an unusual and aggressive move from a fund manager that should be motivated to get the best price for its holding. Skky declined to comment on its campaign to replace the Canaccord directors.

In response to Skky’s coup attempt, Ms. Denham’s committee put a spotlight on why the fund manager’s interests differ from the rest of Canaccord’s shareholders. In a news release on Wednesday, the committee disclosed that back in August, well before the takeover was launched, Skky signed a lockup agreement with Canaccord’s management team “that requires it to tender its common shares to the offer and vote against any other transaction, even if such transaction were to provide greater value to shareholders.”

Previous regulatory filings on the takeover referred to a major Canaccord shareholder supporting the management bid, but didn’t identify Skky. Canaccord executives who own approximately 21 per cent of the company are leading the buyout offer.

Canaccord’s committee said Mr. Flatt wrote a letter last summer stating that while he believed the investment bank was worth more than $15 a share, his decision to commit Skky to the lower price offered by management “was reasonable given market uncertainties, ‘war, rising interest rates and inflation.’”

In keeping with standard practice in takeovers, Canaccord’s committee obtained an independent valuation of the business from RBC Capital Markets. RBC concluded the company is worth from $12.75 to $15.75 per share, or up to 40 per cent more than what the management group is offering.

“While Mr. Flatt has decided to accept the offer, the special committee must consider all shareholders,” said Ms. Denham’s group. The committee said it “has heard from other minority shareholders, who believe the work of the special committee to attempt to surface alternative transactions is entirely appropriate.”

In this showdown, Canaccord chairman David Kassie and chief executive Dan Daviau are squaring off with Ms. Denham, a colleague and friend whose relationship dates back to the 1990s, when all three held senior roles at Canadian Imperial Bank of Commerce.

Trying to fire a special committee during a takeover battle is akin to shoving the referee in a hockey game – regulators consider it bad form. In a 2017 publication, the Ontario Securities Commission set down guidelines on the rights of minority shareholders in transactions involving insider bids.

“In staff’s view, a special committee can play a particularly important role in safeguarding the rights and interests of minority security holders during the course of a contested material conflict of interest transaction such as an unsolicited insider bid,” the OSC said. “Staff believe that related parties involved in a transaction should cooperate with the special committee and refrain from conduct that could be construed as improper or coercive.”

On Wednesday, Canaccord’s special committee said it would respond “in due course” to Skky’s request for a meeting that could see the directors replaced.