U.S. activists eye Canadian proxy battles

Fri Jan 20, 2012 4:25pm EST
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By Pav Jordan

TORONTO (Reuters) - More U.S. investors are targeting Canadian companies for proxy battles to boost the value of their stakes, encouraged by favorable laws and activist attacks on such blue chips as Canadian Pacific Railway (CP.TO: Quote) and Research In Motion.

Brad Allen, senior vice-president at Laurel Hill Advisory Group, said the attack on CP and shareholder restiveness at BlackBerry maker Research in Motion show that shareholders are more willing to take on larger Canadian companies.

Activist shareholders from hedge funds to private equity funds use proxy battles to shake up boards and revamp strategy at companies they see as undervalued and poorly managed. The tactic of voting out existing board members is especially popular in times of sustained market turmoil as shareholders seek to extract value from bleeding stock portfolios.

"More prominent firms are getting involved in these situations and there is no better example of that currently than CP and what's been going on recently as far as rumor mills are concerned at RIM," said Allen, whose firm is one of Canada's leading proxy solicitation companies, which help run campaigns to solicit shareholders' votes for or against corporate boards.

U.S. funds are no strangers to the Canadian market, but they have ventured north with increased frequency since the global financial crisis of 2008-2009. They are also starting to target companies far larger than those with market capitalizations of C$25 million to C$500 million, their traditional target range.

"With CP and RIM sort of bubbling at the same time, it definitely has and will raise the bar to show that nobody is immune to these things," said Allen.

Canadian Pacific Railway, which helped connect Canada from coast to coast more than a century ago, is the target of a proxy fight by William Ackman's Pershing Square Capital Management, a New York hedge fund that wants to replace some of its board and oust its chief executive.

Pershing wants CP to boost productivity, complaining that it lags far behind that of chief rival Canadian National Railway (CNR.TO: Quote), the nation's top rail provider.   Continued...