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Shareholder activist targets SNC, Talisman in push to ‘unlock value’

Pedestrians walk past a sign for the head office of SNC Lavalin in downtown Montreal March 26, 2012.


Prominent investor activist Greg Boland is targeting two of Canada's most challenged companies, SNC-Lavalin Group Inc. and Talisman Energy Inc., in a bid to spark strategic and boardroom changes.

According to a private letter sent Feb. 5 to investors at a fund managed by Mr. Boland's West Face Capital, stakes were acquired in SNC and Talisman Energy with an eye to "unlocking" value at two companies that have seen their share prices hammered – by scandal in the case of SNC and strategic blunders in the case of Talisman. The fund did not disclose details about its investments. Canadian securities laws only require investors to reveal stakes in public companies when their holdings exceed 10 per cent of outstanding shares.

Mr. Boland declined to comment on the letter, which was obtained by The Globe and Mail. In a statement, Toronto-based West Face said it acquired shares in the companies because of "clearly identifiable steps to unlocking ... value that should be as evident to management as it is to the shareholders." West Face's letter also revealed that the fund bought a minority stake in struggling U.S. grocer Safeway Inc.

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Mr. Boland is one of a number of North American activists who are targeting underperforming companies with increasing frequency to push management and directors for change.

The shift reflects increased shareholder frustration with laggard companies and growing investment pressure to deliver returns in volatile markets. Unlike many of his high-profile U.S. brethren, Mr. Boland seldom speaks out publicly against target companies, instead preferring to work quietly with boards and executives to boost shareholder returns.

West Face representatives have recently met with officials from SNC and Talisman to propose strategic changes. It appears that SNC has been responsive to the activist, but frustrations with Talisman prompted the hedge fund to call for a boardroom shakeup to allow for "more direct shareholder oversight."

SNC has seen its stock price plunge as much as 30 per cent since last fall after allegations surfaced of corrupt payments in North Africa. A handful of senior executives have left the company and its former CEO Pierre Duhaime was charged in November with fraud relating to the company's contract to build a superhospital in Montreal.

West Face's letter said it is "pursuing a variety of processes" to turn around the company. It hinted at potential asset sales by highlighting the slim profitability of SNC's packages business and undervalued investments in Toronto-area tollway Highway 407, in which it has a minority stake, and its Alberta electric transmission company, AltaLink.

SNC learned last fall that West Face had become a "meaningful" shareholder of the engineering firm and representatives of the two companies have since met, said Leslie Quinton, senior vice-president of global corporate communications.

"We had the opportunity to have an initial, ordinary course discussion and meeting with West Face as one of our newer shareholders," she said in an e-mail.

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Ms. Quinton didn't disclose what was discussed other than to say it was "a good exchange" and the "management and the board of directors are actively engaged at the present time in honing and formulating a revised strategic business plan," Ms. Quinton added. SNC intends to unveil this plan shortly, she said.

West Face faulted Talisman for its mixed portfolio of energy plays, particularly its move into marginally profitable shale energy properties. Faced with poor returns, West Face called for Talisman to refocus its portfolio of energy assets, eliminate its dividend and repurchase shares. It also called for changes at a board that is still "encumbered" with the same directors who approved the company's unsuccessful acquisition strategies.

Phoebe Buckland, a spokeswoman for Talisman, said the company, with the support of its board of directors, is continuing to pursue its 2012 strategic plan to reduce spending and costs "to build a stronger company." She declined to respond directly to West Face's demands, but said the company is meeting with investors in March to give updates on Talisman's strategies.

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About the Author
Chief Quebec correspondent

Sophie Cousineau is The Globe and Mail’s chief Quebec correspondent. She has been working as a journalist for more than 20 years, and was La Presse’s business columnist prior to joining the Globe in 2012. Ms. Cousineau earned a master’s degree in journalism from the University of Illinois and a bachelor’s degree in economics and political science from McGill University. More

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