WIND MOBILE PARENT COMPANY Globalive has said again the CRTC must hold a public hearing to find out for sure if the ownership of Telus is Canadian enough.
Back in June, Globalive sent a petition to the CRTC which said Telus’s recent aborted attempt to convert to a single share structure showed the Vancouver-based telco may not be complying with Canada’s telecom ownership rules and therefore it may well be in breach of the Telecom Act. So, a full public hearing must be held to determine whether or not Telus is Canadian enough.
Telus responded to the Commission in late July, dismissing the Globalive submission, saying its complaints are based on flawed data. Globalive cited reports from Broadridge Financial Solutions as the basis for its allegations. However, according to Telus, Broadridge reports use geographical and mailing information to provide companies with a snapshot of where their investors are based, but do not filter out short trading and other factors that can result in shares being counted more than once. So, while the Broadridge reports counted 214 million Telus voting shares, the company has only 175 million such shares. Telus executives reiterated last week during its fourth quarter conference call that Broadridge representatives confirmed the data cited should not be used in the fashion Globalive has.
Globalive is unbowed, of course. “(T)he Telus Answer consists of little more than several bald and unsupported assertions of compliance with the Ownership Rules, combined with a high-level and unhelpful overview of its existing compliance mechanisms,” reads the Globalive reply to Telus’s response, filed with the CRTC last week. “The Wind evidence clearly suggests that whatever Telus’s compliance mechanisms are, they are ineffective, and Telus’s Answer has done nothing to allay this concern.
“Wind’s research indicates that many individual brokers and other financial intermediaries who buy and sell Telus shares are not even aware of the compliance mechanisms and do not comply with them before buying Telus voting shares for non-Canadians,” continues the Globalive submission. “The Telus attack on the credibility of the Broadridge reports (i.e., that they routinely involve some double-counting) does not suggest how double-counting would actually undermine the conclusion that approximately 48% of voting shareholders have non-Canadian addresses, and cannot explain the huge discrepancy between those reports and Telus’s assertion of compliance.”
As well, “Telus has failed to address, let alone rebut, the proxy vote disclosure evidence that indicates approximately 42% of shares voted at the company’s recent annual shareholders meeting were held by shareholders who declared themselves to be non-Canadian or refused to answer the required declaration of citizenship.”
Globalive insisted again “(t)he point of the Application is to request a transparent public review of Telus’s compliance and of the attendant Compliance Mechanisms required to ensure that a widely-held, publicly-traded entity like Telus is not only compliant, but remains so…
“To repeat Telus’s own words in this regard, ‘Fairness dictates that all market participants are treated in an impartial manner by the regulator. Fairness dictates that all market participants have the benefit of knowing what corporate, capital and debt structures, as well as ancillary arrangements and agreements, are permissible under [the Ownership Rules]’. On the first point, Telus and Wind agree. On the second, the Review Policy makes it clear that the Commission agrees as well.”
(Ed note: Telus, of course, made that statement when it challenged Globalive’s Canadian ownership and control in 2010)
AS FOR MASON CAPITAL, the latest salvo in its ongoing complaint is a demand for a meeting of the holders of the Telus voting shares to allow holders to vote on the minimum acceptable premium valuation of the voting shares relative to the non-voting shares in any transaction undertaken by Telus involving the exchange or conversion of non-voting shares into voting shares (a “Dual Class Collapse Transaction”), reads its press release on the matter, issued last week.
“Telus management continues to stand by its one-for-one proposal, even though that proposal is based on a flawed valuation and was rejected by voting shareholders earlier this year,” said Michael Martino, principal and co-founder of Mason Capital. “A one-for-one proposal unfairly takes value away from voting shareholders who have paid for it and gives it to non-voting shareholders for free, including Telus’ board and senior management whose personal economic interests in Telus are heavily weighted to the non-voting shares.
“The analysis done by our financial advisor, Blackstone Advisory Partners, confirms that Telus’ one-for-one proposal would represent the worst deal for Canadian holders of high vote shares in any share collapse transaction occurring since the year 2000. Our proposal will allow voting shareholders, who collectively control Telus, to express their views on the appropriate valuation of their voting shares relative to the non-voting shares and to take steps to protect the value of their voting rights,” continued Martino, in the statement.
“At the requisitioned meeting, holders of the voting shares will have the opportunity to vote on an amendment to the articles of Telus to establish a minimum premium valuation of either 4.75%, which represents the historic average trading premium of the voting shares over the non-voting shares, or an enhanced premium of 8%, which is based on a comprehensive valuation study prepared by Blackstone Advisory Partners. If the proposed amendments are adopted, any Dual Class Collapse Transaction may only be carried out by Telus at a valuation below the specified minimum with the special approval of 80% of the voting shareholders voting thereon,” continues the Mason release.
“If voting shareholders do not approve the proposed amendments to the articles at the requisitioned meeting, they will have the further opportunity to vote on one or more non-binding advisory resolutions as to the recommended minimum premium value for voting shares in connection with any Dual-Class Collapse Transaction.
Under the Business Corporations Act (British Columbia), Telus is required to hold the requisitioned meeting within four months from today’s date. If Telus does not send notice of the meeting to shareholders within 21 days from today’s date, Mason has the right to send the notice itself,” says the company.
Telus has not officially responded as yet to Globalive or Mason’s most recent actions but have insisted all along the share conversion is fair and just about good corporate governance. As for its Canadian ownership, Telus has constantly stated it is and always has been compliant with all Canadian laws.
- Greg O’Brien