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Telus delists non-voting shares in New York after long struggle with hedge fund Mason Capital

Date: Tuesday, February 5, 2013
Author: Christine Dobby, Financial Post

After a drawn-out dispute with a U.S. hedge fund, Telus Corp. moved forward Monday with the reorganization of its dual-class share structure into a single class of common stock.

The consolidation appears to conclude its struggle with Mason Capital Management LLC, which Telus alleged employed a so-called “empty voting” strategy by taking both long and short positions in the Vancouver-based telecom company’s shares, a description the New York City-based hedge fund hotly contested through a series of public relations efforts and legal proceedings.

On Jan. 25 Telus announced it reached an agreement with Mason Capital to end all further litigation related to a plan of arrangement approved by the Supreme Court of British Columbia.

Last October, a majority of Telus shareholders voted to approve a proposal to exchange the non-voting shares for common shares on a one-for-one basis and in December, a British Columbia Supreme Court judge rejected an appeal by the New York City-based hedge fund and approved the proposal.


Mason Capital first disclosed it had acquired close to 20% of Telus voting shares last April after the telecom company’s February announcement of a proposed change to its dual-class structure, a move widely supported by the rest of its shareholders.

The hedge fund, however, said it opposed the move, demanding a premium be paid to holders of common shares, which typically traded at a slightly higher price than Telus’s non-voting shares.

Telus’s dual-class structure initially emerged to comply with regulations limiting foreign ownership of large telecom companies to no more than one third. The non-voting shares, which trade on both the New York Stock Exchange and the Toronto Stock Exchange, were created to facilitate non-Canadian ownership, but U.S.-based investment in the company dropped off sharply in 2004.

Telus said it wanted to improve share liquidity through the elimination of the non-voting class and after it announced its proposal, the historical spread between the trading price of the two share classes narrowed, according to the Dec. 18 appeal decision by Judge Shelley Fitzpatrick of the B.C. Supreme Court.

Judge Fitzpatrick wrote that Mason was simultaneously long about 33.3 million Telus shares and short about 32.6 million shares and aimed to profit off the re-emergence of the historical premium attached to the common shares.

“Mason’s investment in Telus was structured in such a way that its economic interest in Telus primarily related to the spread of the share prices as between the two classes, not to the price of the shares themselves,” she wrote.

The hedge fund’s motivations for opposing the proposal aside, the judge ruled it was fair and reasonable for Telus shareholders.

Mason has slashed its Telus holdings and as of Dec. 31 it owned only 3.4% or just under six million common shares, it said in a recent regulatory filing.

Telus did not disclose details of the agreement with the hedge fund announced Jan. 25 apart from noting that it did “not involve the payment of funds to either party.”

Telus said its non-voting shares were delisted from the New York Stock Exchange and its common shares started trading at the opening bell on Monday.

Its non-voting shares on the Toronto Stock Exchange will be delisted on or around Feb. 8 and the newly issued common shares will commence trading on or about Feb. 11, Telus said.