Mason Capital Management LLC ("Mason") today reiterated several serious concerns with the actions of TELUS Corporation (TSX:T, T.A; NYSE: TU) relating to its proposal to exchange all of its non-voting shares for voting shares on a one-for-one basis. The proposal is scheduled to be voted on at an October 17 meeting of TELUS shareholders. TELUS voting shares historically are more valuable than non-voting shares and have traded at a premium. In the 13 years prior to TELUS’ initial proposal in February 2012, $98 billion in TELUS voting shares traded at an average premium of 4.83% relative to the non-voting shares, with the premium reaching as high as 15.23%. This proposal, if passed, will result in a loss of substantial value to the class of voting shareholders, which Mason estimates at approximately $200 million based on the elimination of the historical premium. In addition, voting shareholders will be forced to relinquish 46% of their voting power and will receive no compensation. Leading proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) recognizes the flaws associated with TELUS’ proposal, stating that: “The proposed exchange ratio… in veering off from the well-established, enduring market ratio, is a cause for concern, and should legitimately be scrutinized by shareholders.” 1 Michael Martino, Mason’s principal and co-founder, said: “It is imperative that all voting shareholders arm themselves with the facts about the true economic implications of TELUS’ proposal, which based on precedents, is one of the worst offers for holders of shares with superior voting rights in a share collapse seen in Canada in over a decade. Mason would support a share collapse at an exchange ratio that accounts for the superior value of the voting shares in the same way the market has accounted for that superior value for over 13 years. We urge shareholders to reject this oppressive proposal and force TELUS management to come back with an exchange ratio that provides voting shareholders with the compensation they deserve.”
Martino continued, “It is unfortunate that TELUS has sought to distract investors and deflect attention from its flawed proposal by making egregious comments about a significant shareholder. We encourage voting shareholders to consider the way that TELUS has conducted itself and treated shareholders over the last several months. In addition to ignoring shareholder concerns regarding the proposed exchange ratio, TELUS has taken several actions to push through its one-for-one proposal at any cost, including actions aimed at manipulating the October 17 vote that raise serious concerns regarding TELUS’ commitment to ethical standards and corporate governance.”Mason cited the following issues as causes for significant voting shareholder concern: TELUS’ board is shirking its fiduciary duties.
- TELUS continues to ignore the fact that voting shares are historically – and fundamentally – more valuable than non-voting shares.
- Despite repeated attempts to engage TELUS to discuss conversion options and an exchange ratio that would treat ALL shareholders fairly, TELUS’ board and management remain unwilling to consider anything beyond the unfair and oppressive one-for-one exchange.
- TELUS was forced to withdraw the very same proposal it is seeking today because it faced certain rejection by shareholders in May.
- Despite material conflicts of interest at the board and management level, TELUS never obtained a fairness opinion for the voting shareholders.
- Instead, TELUS relied on a severely flawed opinion from Scotiabank, which was based upon the wrong precedents and misinterpreted the facts. Specifically, like TELUS, Scotia gave no weight to market trading prices – whether at TELUS or in its precedents – in determining what is fair.
- Rather than respecting the rights afforded to shareholders by allowing the vote to play out fairly, TELUS continues to engage in a highly-controversial tactic known as “vote buying,” paying dealer solicitation fees for votes – but only for votes in favor of the proposal.
- TELUS has reduced the minimum voting level for approval by voting shareholders from 66.6% to 50% in a coercive effort to tip the scale in its favor and force through its proposal.
- The majority of TELUS’ management team and board’s holdings are tied to the non-voting shares. As a group, the management team and board hold approximately $150 million more in non-voting shares than voting shares and stand to make approximately $4 million at the expense of voting shareholders (based on the elimination of the historical price premium) if this proposal is approved.
- Bernard Black, Professor of Law at Northwestern University’s Law School and Kellogg School of Management, notes this clear conflict of interest, stating that the board and management “have a negative economic interest in the value assigned to votes.”2
- Mr. Black adds that, “in the US, this conflict-of-interest would cause a court to assess management’s decision to propose a zero-premium,” and highlights the fact that “despite their conflict of interest, management plans to vote its own voting shares in favor of the share swap.”2
Mason’s dissident proxy circular is available on TELUS’ company profile on SEDAR at http://www.sedar.com.TIME IS RUNNING OUT! PLEASE VOTE ONLY YOUR BLUE PROXY PRIOR TO THE VOTING DEADLINE OF NOON (ET) ON OCTOBER 15 Any questions and requests for assistance may be directed to theProxy Solicitation Agent: KINGSDALE Shareholder Services Inc. The Exchange Tower130 King Street West, Suite 2950, P.O. Box 361Toronto, OntarioM5X 1E2 www.kingsdaleshareholder.com North American Toll Free Phone: 1-888-518-1565 Email: firstname.lastname@example.org Facsimile: 416-867-2271 Toll Free Facsimile: 1-866-545-5580 Outside North America, Banks and Brokers Call Collect: 416-867-2272 Forward looking statements: This press release contains statements about expected future events that are forward-looking. By their nature, forward-looking statements require Mason to make assumptions and predictions and are subject to inherent risks and uncertainties. Whether actual results and developments will conform with our expectations and predictions is subject to a number of risks, assumptions and uncertainties, many of which are beyond our control, and the effects of which can be difficult to predict, including, without limitation, risks, assumptions and uncertainties related to: the approval of the Proposal by shareholders, the consummation of the Proposal by TELUS; actions taken by TELUS to frustrate Mason’s actions or objectives; changes in market conditions; the market value and trading price of the Common Shares; the level of foreign ownership of TELUS; actions taken by TELUS to remedy a breach of the foreign ownership levels; intervention by regulators or the courts; and other factors set out in TELUS’ Management Circular. In evaluating any forward-looking statements in this press release, we caution readers not to place undue reliance on any forward-looking statements. Readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by our forward-looking statements. There is significant risk that the forward-looking statements will not prove to be accurate. Unless otherwise required by applicable securities laws, we do not intend, nor do we undertake any obligation, to update or revise any forward-looking statements contained in this press release to reflect subsequent information, events, results or circumstances or otherwise.
1 ISS Proxy Advisory Services Report on TELUS Corporation; September 28, 20122 “Equity Decoupling and Empty Voting: The Telus Zero-Premium Share Swap,” Bernard C. Black; September 28, 2012