The motives fuelling a minority shareholder’s make an effort to thwart Corus’s $2.65 billion purchase of Shaw Media were called into question Friday, as Catalyst Capital Group Inc. aired its concerns about the proposed sale on a conference call with investors and analysts.
Catalyst, a personal equity firm with US$6 billion in assets that are experts in distressed situations, said its only objective is to maximize the value of those minority shares. The company says it owns no other position attached to the transition, other than class B shares of Corus.
Catalyst has argued that Corus is overpaying for Shaw Media up to $858 million. The non-public equity firm is calling for that March 9 vote to be postponed, for more disclosure and the capability to inquire directly of the Shaw family, which controls both Corus and Shaw Media’s parent company, Shaw Communications Inc.
“We actually have obtained extraordinary support from fellow shareholders,” said Gabriel de Alba, managing director and partner at Catalyst. He did not name any investors but asserted some were large ones, and that the momentum behind their cause has grown in the last 24 hours. “They have seen the same concerns that Catalyst has highlighted associated with both valuation and reporting,” he added.
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But the broader market appears perplexed by the assault by Catalyst, which has long employed combative strategies by simply purchasing large stakes like a creditor. Now, Catalyst states be fighting for the little guy who, it contends, is assuming more risk and has seen his position become depressed and diluted.
Late in the 50-minute call, one person asked if de Alba would address what he described as “an elephant within the room,” talking about Catalyst’s bitter feud with private equity finance firm West Face Capital Inc., a trader in Wind Mobile Corp, which Shaw has proposed to buy for $1.6 billion. Senior managers at Shaw said that they plan to make use of the arises from the Shaw Media sale to finance their December acquisition of Wind.
West Face purchased a 35.42 percent stake in Wind as a person in a consortium of investors that purchased the carrier in September 2014 from the former foreign owner, VimpelCom Ltd., to have an estimated $300 million.
In a lawsuit weaving its way with the courts, Catalyst had alleged that West Face secured its ownership stake in Wind by obtaining and taking advantage of confidential information that belonged to Catalyst, which in fact had also been pursing Wind. Now, West Face stands to create lucrative returns with money paid by Corus.
“What you’re describing is a beautiful soap opera” that should be “released on a women’s TV channel,” de Alba said in reaction towards the question.
“That’s just a fantastic story that has absolutely nothing to do C again it’s an excellent soap opera C but is not to do with the realities of this deal. We’re believers that value can be unlocked by respecting the minority shareholders.”
On Friday, proxy advisory research firm Glass Lewis & Co. LLC published a recommendation meant for the Shaw Media deal, joining Institutional Shareholder Services Inc. in endorsing the transaction and it is terms. The Glass Lewis report did observe that Corus’ assertion that the deal will be immediately accretive to earnings per share and free cash flow per share despite the fact that these calculations didn’t think about the costs of borrowing that are related to this deal to become “unusual and potentially misleading.” Nevertheless, Glass Lewis said the deal has merit at “a reasonable valuation.”
cpellegrini@nationalpost.com
