(Reuters) - Telus Corp’s (T.TO) largest investor has sharply criticized the Canadian telecom company’s revived plan to consolidate its two classes of stock on a one-for-one basis, saying Telus made unfair procedural changes to clear the way for approval.
Earlier this year U.S. hedge fund Mason Capital Management LLC derailed Telus’s initial effort to win backing for the plan, which would give non-voting shares the same rights as voting shares.
The dispute increasingly turns on which class of investors should have final say over the change.
The Vancouver-based company’s original plan called for the approval of two-thirds of votes cast by voting and non-voting shareholders, with each class voting separately.
Mason held 19 percent of Telus’s voting shares as of March 31, according to Thomson Reuters data, giving it an edge in that class.
With Mason planning to block the plan, Telus withdrew it in May. But on Tuesday Telus revived the plan while changing the ground rules for the shareholder vote.
The new proposal seeks two-thirds of non-voting shares, but only a simple majority of voting shares, because, Telus said, their legal rights will not change under the proposal. But the new rules would limit Mason’s power to block the consolidation.
“Telus’ new proposal to collapse the shares on a one-for-one ratio is the very same proposal that was rejected by shareholders a few short months ago, except that Telus appears to be attempting to circumvent the protections afforded to the voting shareholders under the law,” said Mason Principal Michael Martino in a statement late on Tuesday.
Telus Chief Executive Darren Entwistle said the company - which competes with Rogers Communications Inc and BCE Inc’s Bell Canada - was responding to “overwhelming” support from shareholders.
“Excluding Mason Capital, proxies representing 92.4 per cent of total shares received were in favor of our first proposal before we withdrew it in May,” Entwistle said in a statement.
Mason stepped up its battle with Telus in early August, calling for a meeting to amend the company’s bylaws with a guaranteed premium for voting shares in any future consolidation.
Telus said then that the premium would need to be approved by two-thirds of votes cast by both voting and non-voting shares, voting separately. Given that non-voting shareholders have little to gain, that may be a tough sell.
Mason, for its part, said only voting shares should vote on the bylaw change, because non-voting shareholders’ rights would not be affected.
Mason claims that Telus’s board and its senior management - whose personal economic interests are weighted to the non-voting shares - stand to benefit from a one-for-one consolidation.
Mason argues that voting shareholders paid more, on average, for their stock than non-voting shareholders, and should be rewarded for that as the two classes merge. Telus says universal voting rights are consistent with good corporate governance.
Ahead of the first vote, Mason had borrowed a large number of non-voting shares, and thus stood to benefit if their price fell.
Telus said shareholders on record as of September 4 will be entitled to vote at the October 17 meeting.
Reporting by Allison Martell; Editing by Frank McGurty