Telus Corp. will have one class of common shares after shareholders voted strongly in favour of the plan on Wednesday, defeating a U.S. hedge fund’s attempt to get a premium for voting stockholders.
Telus (TSX:T) said late Wednesday that shareholder support was solid at a vote held earlier in the day, adding that none of Mason’s Capital Management’s four resolutions received the support from common shareholders required to pass.
Detailed voting results were not immediately available.
The Vancouver-based telecom and New York’s Mason Capital have been battling for months over the Vancouver company’s one-for-one share conversion plan with no premium.
“The outcome of today’s shareholder vote is distinctly positive for Telus shareholders. Moreover, the result realized exemplifies the principles of good corporate governance and the fairness of shareholder democracy in Canada,” chief executive Darren Entwistle aid in a statement.
Entwistle slammed the hedge fund for its tactics.
“Fundamental Telus investor views dominated, prevailing over a self-serving hedge fund engaging in a troubling empty voting trading strategy, negative publicity campaign and multiple court challenges to try to defeat this proposal for their own profit,” Entwistle said.
Telus has converted its dual-class share structure, which separates shares that have voting rights and non-voting A shares (NYSE:TU).
The telecom company said the courts agreed that a simple majority of the common share class and 66.67 per cent of the non-voting share class were required for its proposal to succeed.
Mason has said the threshold for holders of voting shares also should have required two-thirds support.
Mason Capital did not provide any immediate comment.
The hedge fund has repeatedly said holders of Telus’ voting shares should get a premium to approve it, something Telus has said its governing rules don’t require it to do.
The hedge fund had proposed a minimum premium valuation of either 4.75 per cent — which represents the historic average trading premium of the voting shares over the non-voting shares — or a minimum premium of eight per cent.
Mason owns about 19 per cent of Telus’s voting stock, making it the largest voting shareholder.
However, Mason sold short almost the same amount in non-voting shares, essentially betting the price of those shares would fall if the share consolidation plan was defeated.
Short sellers make a profit when the stock price falls.
It is a legal trading strategy in Canada based on the traditional gap in prices between the voting and less desirable non-voting shares. Telus has complained that Mason Capital was voting $1.9 billion worth of Telus’s common shares with only a $25 million net economic stake in the company, calling it “empty voting.”
Telecom analyst Troy Crandall said one class of shares simplifies the situation and lets Telus’s management get on with running the company without the distraction.
As for Mason, Crandall said he doesn’t believe the hedge fund will immediately sell its stake in Telus, which would mean a loss.
“I don’t expect tomorrow that you’re going to see them sell a 19 or 20 per cent position in Telus,” said Crandall of MacDougall, MacDougall & MacTier in Montreal.
“When you have a very large position you cannot move out of things very fast, generally. It seems like something they will have to slowly and carefully move out of,” Crandall said.
“Given the way that they structured their trade, they need to have a spread and if they don’t get the spread they are essentially in a money-losing position,” he said of Mason.
Telus has said a vote in favour of its proposal to exchange non-voting shares for common shares on a one-to-one basis can be seen as a vote against Mason’s resolution for a premium for voting shareholders.
Similarly, a vote against Telus’ share exchange proposal was a vote in favour of the Mason Capital resolutions.
Telus first introduced its share-conversion plan in February, but withdrew the proposal right before its annual general meeting in May when it said that Mason’s “empty voting” tactics would prevent the proposal from passing.
Ratification of the share exchange proposal is scheduled for final court approval in early November.
Shares in Telus closed at $62.89, up two cents, on the Toronto Stock Exchange. Non-voting Class A shares closed at $63.72, up 52 cents, on the New York Stock Exchange.