TORONTO (Reuters) - Ontario Teachers’ Pension Plan, the largest stakeholder of Maple Leaf Foods, said on Wednesday it would oppose the Canadian food processor’s adoption of a shareholder rights plan, used by companies to protect against takeovers.
Maple Leaf, whose stock price has been battered in recent years from a series of issues ranging from a food scandal to high commodity prices, implemented the plan on Tuesday after an agreement between its largest shareholders, Teachers and McCain Capital Corp. expired.
“We will vote against the rights plan if it is put to a shareholder vote,” Neil Petroff, Teachers executive vice-president for investments, said in a statement.
The Globe and Mail reported earlier this month that Teachers’ was looking to sell its stake, which would end a 15-year partnership with the McCain family. The two parties own a controlling stake in Maple Leaf, with the McCain stake currently around 31 percent, sources say.
A shareholder rights plan, also known as a poison pill, is a mechanism that allows existing shareholders in a company to acquire a large number of new shares at a discount, making it more expensive for hostile bidders to acquire the company.
Under the plan, Maple Leaf shareholders would get rights to buy additional shares at a 50 percent discount to the market. They could exercise those rights if any party attempts to acquire 20 percent or more of the shares without extending the offer to all shareholders.
“The question investors are looking at is, does this preclude one group coming in and buying that Teacher’s block?” said Bob Gibson, an analyst at Octagon Capital Corp. “It would more likely have to be sold to a number of groups as opposed to one.”
Teachers has not commented on the Globe and Mail story, but a source close to the fund says the group is talking to interested parties.
Ontario Teachers’ Pension Plan, which owns 36.3 percent of the voting common shares of Maple Leaf Foods, also said it had reached an understanding with the company regarding conditions under which it could sell the stake.
“Finally, Teachers has entered into an understanding with MFI (Maple Leaf Foods) as to the basis upon which any secondary offering by Teachers would be completed,” Teachers said.
That means that the sides have agreed what kind of buyer they would both agree on for the stake.
The pension plan said it was considering “all other options” open to it with respect to challenging the poison pill, which hinders its ability to sell the stake at an acceptable price.
Toronto-based Maple Leaf said the rights plan was not in response to any specific initiative by any particular group.
Maple Leaf has been hit hard in recent years by the rising Canadian dollar, a run-up in farm commodity prices and listeria contamination in some of its deli meats two years ago. The outbreak was linked to at least 20 deaths.
In May, Maple Leaf put its pork processing business up for sale as part of efforts to refocus on value-added meat, meals and bakery business.
“Sure, it’s had a lot of bad news over the years,” said Gibson. “Fundamentally it’s good.”
Maple Leaf shares fell as much as 5 percent before closing up 3 Canadian cents at C$8.97 on the Toronto Stock Exchange.
Editing by Frank McGurty