Telus is taking legal action to block hedge fund Mason Capital from holding a meeting with the telecom company's shareholders to back a minimum premium for supporting a share consolidation plan.
The Vancouver-based firm said Friday it will seek a court order to prevent Mason's Oct. 17 meeting of Telus's voting shareholders, which it calls undemocratic and invalid under Canadian law. Telus said the British Columbia Supreme Court will consider the matter next Thursday and Friday.
Both Telus and New Yorkbased Mason are in a battle over converting the telecom company's dual share structure of voting and non-voting shares into one class of common shares. Adding to the conflict is Mason's decision to hold its meeting on the same day as Telus planned to meet with both classes of shareholders to vote on a proposal to combine its voting and non-voting shares into one class of stock.
"It's really a ridiculous attempt," Telus chief financial officer Robert McFarlane said. "It creates confusion to shareholders."
"We expect to strike it down in court and go ahead with our meeting," McFarlane said. But shareholders, including Mason, can have resolutions put on the Oct. 17 meeting's agenda.
Telus said its non-voting shareholders can't be excluded from the plan to convert the company's stock into one class of common shares.
Mason owns just under 20 per cent of Telus's voting shares. It is proposing a minimum premium valuation of either 4.75 per cent - which represents the historic average trading premium of the voting shares over the nonvoting shares - or an enhanced minimum premium of eight per cent to support one class of shares.
Telus has said the share conversion will take place on a one-to-one ratio and there will be no premium for voting shareholders under the plan.
By accumulating almost a 20 per cent stake in Telus in common stock while at the same time short-selling nearly the same amount of non-voting and common Telus stock, Mason was able to vote nearly $2 billion worth of stock with only a $25-million net economic stake, Telus has said.
The hedge fund said Friday that non-voting shareholders can attend the meeting but won't be able to vote.
Mason co-founder Michael Martino said that he wants to protect the rights of Telus voting shareholders.
He aims to establish a minimum premium to be paid to voting shareholders in any transaction to have one class of shares.