Telus said Monday that it has been given permission to go ahead with a vote on its share exchange proposal by the Supreme Court of British Columbia, despite an appeals court ruling that sided with a dissident shareholder.
The Vancouver-based telecom company (TSX:T) said it will push ahead with its shareholder vote —which is slated for Wednesday, but may be postponed — to end its dual-class share structure after the court reaffirmed the validity of its plan.
The assurance comes after hedge fund Mason Capital Management was given the green light by the British Columbia Court of Appeal last Friday to hold its rival meeting of voting shareholders of Telus to consider a premium for the share conversion plan. It’s yet known when that meeting will be held.
Telus wants to convert its dual-class share structure, which separates shares that have voting rights and non-voting A shares (NYSE:TU).
Mason has repeatedly said holders of Telus’s voting shares should get a premium to approve it, which Telus has said its governing rules don’t require it to do.
“We are pleased that the Supreme Court of B.C. has once again provided their support for our share exchange proposal to proceed, rejecting the latest legal manoeuvre from Mason Capital whose net economic ownership position in our company is a mere 0.02 per cent,” chief executive Darren Entwistle said in a statement.
New York-based Mason Capital owns about 19 per cent of Telus’s voting stock, making it the largest voting shareholder. However, Mason shorted 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.
Telus’s share conversion proposal requires approval of two-thirds of the company’s non-voting share owners and a majority of common shareholder votes.
Mason has 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 said Monday it had no immediate comment.
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.
Telus has said the share conversion plan will give it more liquidity, is in line with good governance and will allow the telecom company to list its common shares on the New York Stock Exchange.
“With 92.4 per cent support from our committed investors realized from our first proposal earlier this year and both independent proxy advisory firms, ISS and Glass Lewis, endorsing our proposal once again, we firmly believe this proposal is fair and significantly beneficial to all shareholders. Moreover, this effort is supporting material value creation for our company and both classes of our shareholders,” Entwistle said in his statement.
Traditionally, the non-voting shares have been primarily held by Canadian institutional and retail investors.
Voting shares in Telus moved 14 cents higher to $62.85 Monday on the Toronto Stock Exchange, while non-voting shares added 33 cents to $63.04 on the New York Stock Exchange.