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B.C. court blocks Mason meeting aimed at curbing Telus’s share restructure

Exteriors of the Telus Tower located at 25 York At. in downtown Toronto, photographed January 24 2011.

Fred Lum/Fred Lum/The Globe and Mail

Telus Corp. has scored a court victory, preventing a U.S. hedge fund from holding a meeting that had been designed to thwart the telecommunications company's share consolidation plan.

New York-based Mason Capital Management LLC controls nearly 20 per cent of Telus voting shares, but the hedge fund also has a short position on Telus non-voting shares that is almost as large as its ownership of voting shares.

"When a party has a vote in a company but no economic interest in that company, that party's interests may not lie in the well-being of the company itself. The interests of such an empty voter and the other shareholders are no longer aligned and the premise underlying the shareholder vote is subverted," Mr. Justice John Savage of the Supreme Court of British Columbia said in a ruling released late Tuesday.

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Mason had announced on Aug. 31 that it wanted to call a meeting for Oct. 17 to give investors a chance to endorse its rival proposal to secure a minimum premium for voting shareholders in the event of a share consolidation transaction. In doing so, Mason was trying to pre-empt Telus's plans to convert its non-voting shares to voting shares on a one-to-one basis by holding its competing vote just hours before Telus's own special meeting of shareholders.

But Orestes Pasparakis and Robert Anderson, two of the lawyers representing Telus, argued that their client's case should win the day.

The judge agreed with Telus that Mason is indifferent to the overall success of the telecommunications company.

"Telus argues that Mason's position is an example of empty voting. Mason has simultaneously acquired common shares and shorted non-voting shares. Mason's control over Telus's voting stock is many times Mason's net economic interest in Telus. Through its trades, Mason has successfully decoupled its economic interest in Telus shares from the voting rights carried with those shares," Mr. Justice Savage wrote in his 32-page decision. "Mason only stands to profit if the holders of the common shares are unwilling to accept the one-to-one conversion."

Telus has been trying for months to abolish its current share structure, which denies the holders of about 151 million non-voting shares the right to have a say in the election of the board and other matters.

At stake is hundreds of millions of dollars. The non-voting shares always trade at a lower price than the voting stock. If the Telus plan were to pass, that discount would be eliminated.

"Only Mason stands to profit if the price differential between common shares and voting shares increases. And only Mason is indifferent to the overall value of Telus itself," the judge wrote. "The fact that Mason shares some interest with other common shareholders does not mean that its interests align with those shareholders in a broader sense."

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More


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