Lawyers clashed Friday afternoon in a hastily called regulatory hearing as dissident investor Catalyst Capital Group Inc. launched an 11th hour bid to obstruct next week’s shareholder vote on Corus Entertainment’s proposed $2.65-billion takeover of Shaw Media.
Catalyst alleges Corus made “material misstatements” within the information that was presented to shareholders concerning the financial underpinnings and benefits of the proposed transaction. It wants the OSC to order that Wednesday’s vote be postponed until later this month.
Robert Staley of Bennett Jones LLP, counsel for Catalyst, told the hearing the application is designed only to correct the disclosure issues, not to hinder the transaction.
“It is not Catalyst’s intention to avoid shareholders from getting a vote around the transaction,” he explained because the hearing got underway.
Lawyers for Corus and Shaw weren’t buying any one of that. They try to shut the hearing down as soon as possible therefore the Wednesday vote can proceed.
“One lone shareholder shouting in the wilderness does not a public interest make,” said Larry Lowenstein, a partner with Osler, Hoskin & Harcourt LLP, who appeared on behalf of Corus.
“Not a single other shareholder has expressed concerns to Corus,” he explained. “The details are in the market inside a fair process. It’s time for shareholders to vote.”
Friday’s fireworks were just the start. The hearing came together so quickly on Friday the OSC panel hearing the case hasn’t even were built with a chance to see whether Catalyst has the technical right to launch the case.
Indeed, Lowenstein’s point about Catalyst because “lone shareholder shouting in the wilderness” is one of the issues the panel must consider when it reconvenes Monday.
Pamela Foy, an employee counsel using the OSC, argued prior to the panel there was reason to question whether Catalyst had the right to create the general public interest complaint.
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Commission rules allow a personal party to produce a complaint within the public interest, but panels can block such claims if they are convinced the complainant is launching the case for some personal, tactical advantage.
The hearing resumes Monday afternoon, at which point the panel will hear arguments whether Catalyst actually has got the legal standing it needs to bring the applying.
If the panel disagrees, the matter dies. If the panel agrees, lawyers for Catalyst will argue the situation until 6 p.m., and also the panel will deliberate around the matter later Monday evening.
At least one academic has implored the OSC to intervene and delay the offer until more details was publicly disclosed to investors about how exactly it joined together and the potential conflicts of the parties involved.
These included how the Shaw family, which controls the majority of the voting shares of both Corus and Shaw Media’s parent company, Shaw Communications Inc., stands to benefit by shuffling the assets within its cable empire.
In a six-page letter submitted Monday to the OSC, Anita Anand, a law professor in the University of Toronto, said that Corus didn’t explicitly state the direct or indirect benefits that could accrue towards the Shaw family in the Feb. 9 circular to shareholders.
Anand known this as “a stark omission,” stating that it “arguably constitutes a misrepresentation” that may be “violating the disclosure requirements” in position for deals of this kind.
“Securities law is based on making certain investors have adequate information” so that they create a fully informed decision, Anand added the 2009 week during a phone interview. “I do not think shareholders have obtained what they’re owed under securities law. In my experience, delaying the deal is not a big ask.”
“It is hardly surprising that the minority shareholder would scrutinize a related-party transaction like this – as they should,” said Richard Leblanc, an expert in corporate governance along with a professor at York University in Toronto. He added that companies involved in deals this intimate should “be seen as exceeding beyond and beyond the normal disclosure obligations – if you’ve got nothing to hide.”
During the two weeks since Catalyst’s opposition to the deal first went public, Corus has staunchly defended the company’s disclosure practices.
Corus spokesperson Sally Tindal did not immediately respond Friday afternoon to a request for comment.
