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Mason Capital loses appeal in challenge to Telus share plan

© Chris Wattie / Reuters/Reuters

The long-standing battle between Mason Capital and Telus Inc. over the telecom's dual share structure took another twist Thursday with the disclosure that the New York-based hedge fund had sharply reduced its holdings.

Mason, in a mandatory disclosure document filed with regulators, said it has reduced its common (voting) share holdings to just over 5.9 million shares.

That figure represents about 3.4 per cent of the common shares, down from about 19 per cent previously.

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"This confirms Mason Capital has sold down its empty voting position in TELUS, selling off 26.9 million of the 32.8 million common shares they held when they last reported, while similarly reducing its short trading position," Telus chief corporate officer Josh Blair said in a statement Thursday night.

"They have been selling off their stake over the last few months, using the alternative monthly reporting system to postpone disclosure of their true, diminishing position until today."

"We look forward to moving ahead with the share exchange, a proposal that is strongly supported by our shareholders, benefits our shareholders and is consistent with the principles of good corporate governance," Mr. Blair said.

Telus had two classes of shares, common and non-voting, to comply with Canada's foreign ownership rules for big telecom companies, which don't allow such ownership to exceed 33.3 per cent.

However, the company says the dual-share structure poses corporate governance issues and reduces share liquidity.

Both classes of shareholders have already voted heavily in favour of the conversion and last month Mason lost a decision in B.C. Supreme Court over its battle to receive a premium for voting shares.

Mason appealed, however, and the Supreme Court ruling in favour of the one-for-one conversion was stayed by British Columbia's Court of Appeal, the province's highest court, until that appeal could be heard and decided.

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No date for that hearing has been set an it was unclear what implications, if any, the latest move by Mason might have.

The New York-based hedge fund had proposed a minimum premium valuation of either 4.75 per cent — which represents the historic average trading premium of the voting shares over the non-voting shares — or a minimum premium of eight per cent.

In approving the one-for-one share conversion plan last month, the B.C. Supreme Court took note of the New York-based hedge fund's so-called empty voting tactics.

Mason's opposition to the plan must be viewed through the "lens of its unique strategy," which had nothing to do with the well-being of Telus and its shareholders, Justice Shelley Fitzpatrick wrote in her decision.

"It can hardly be overstated that the contention by Telus that Mason is an 'empty voter' in this and prior proceedings has infused much of the tenor in the contest between them," Fitzpatrick wrote.

"Mason rails against this pejorative moniker. Whether one accepts that name or not, it seems that, at best, one could describe Mason as an 'opportunistic investor.' "

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Empty voter is a reference to Mason's strategy of accumulating an almost 19 per cent stake in Telus in common stock while at the same time short-selling nearly the same amount of non-voting and common, Telus has said.

As a result, Mason was able to vote nearly $2-billion worth of stock with only a $25-million net economic stake, Telus said.

The battle between Mason and Vancouver-based Telus has been going on since last spring. Mason Capital repeatedly said holders of Telus' voting shares should get a premium to approve the share conversion plan.

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