Proxy battles loom as Canadian activists grow edgy

Sun Nov 20, 2011 10:32am EST
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By Pav Jordan

TORONTO (Reuters) - Underperforming Canadian companies should brace for a wave of shareholder activism as investors try to wring value from portfolios that have been battered in a global market slump.

In the last few weeks alone, three top companies - BlackBerry maker Research In Motion RIM.TO, grain handler Viterra Inc VT.TO and Canadian Pacific Railway (CP.TO: Quote) - have faced highly public investor agitation, once a rarity in Canada.

In all three cases investors are unhappy with management strategies to reverse falling stock prices.

When management doesn't respond, a full-scale proxy battle can ensue, as activists resort to shareholder votes to force management to boost dividends, change strategy or even to scupper an unwanted takeover. For the agitators, a successful fight often results in installing their own supporters on the board of directors.

"What's happening is that funds, most of whom have never thought of being activist investors, are looking at their screens and seeing a lot of red," said Walied Soliman, a partner at the Norton Rose Group and one of Canada's leading proxy battle veterans at the tender age of 34.

"Investors are saying, 'Some of this red, we can't control,' but they are also looking at some deeper reds and saying, 'Why is this such a deep red? I know everyone is underperforming because of the markets but these guys are performing well below the market'," he said.

Proxy battles have also emerged as a useful technique to court shareholders in hostile takeover situations.

A recent example is Wi-Lan's WIN.TO unsuccessful bid for Mosaid Technologies MSD.TO, defeated by a white knight bid from Sterling Partners.   Continued...