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Mason Capital bashes Telus share planJENNIFER ROBERTS/The Globe and Mail

Hedge fund Mason Capital is laying out more reasons it says shareholders should oppose Telus Corp. 's planned conversion to a single class of stock, arguing that the plan may force non-Canadian shareholders out of the company and lead to a loss of liquidity.

Most of the focus so far has been on the fact that there will be a benefit to the owners of non-voting shares when these are converted to voting Telus shares, one-for-one, because the non-voting shares have historically been cheaper to acquire.

On Monday, Mason laid out a much deeper case in its fight with Telus. Mason has amassed almost 20 per cent of Telus's common shares, and plans to vote against the deal.

The hedge fund said that it would consider a "revised proposal that pays an appropriate premium for the voting shares and is structured, to the extent practical, to avoid adverse effects on liquidity."

Mason has played a canny game by buying up Telus stock and exploiting the trading dynamic between the two stocks (you can read about its gambit here.)

Now it must convince other shareholders to pile on and block the planned transaction.

Telus has tried to cast Mason as a short-term pirate, moving in for an easy kill at the expense of long-term shareholders. Mason is trying to cast itself as a defender of the interests of all holders of voting stock. In reality, Mason does appear to just be a short-term player, but it's doing nothing offside and only taking advantage of an opportunity created by the way Telus structured the transaction.

In its release Monday, Mason argues that the "proposed structure will dramatically reduce the permitted level of foreign ownership, thereby hurting the liquidity of Telus stock."

New York-based Mason says that because there's no restriction on non-Canadians owning non-voting shares, and a restriction of 33 per cent on voting shares, currently foreign ownership levels can reach as high as 64 per cent. But under a single class, with all shares getting the vote, that will drop to 33 per cent of the unified class.

"As soon as the proposed conversion to a single class takes effect, non-Canadian index funds will be forced to sell 2.8 million Telus shares, according to a research report by Scotiabank," Mason said.

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