* Mason Capital asks court for access to proxy voting
* Votes related to failed plan to merge two share classes
* Hedge fund says information to guide investment strategy
* Company says it may reintroduce share-unification plan
* Telus dismisses Mason as working for short-term profit
By Alastair Sharp
TORONTO, July 11 A U.S. hedge fund has escalated
its battle with Telus Corp by asking a court to force the
Canadian telecom to reveal how much support shareholders had
given the company's failed plan to unify its two classes of
Mason Capital Management LLC, Telus' largest shareholder,
said it could base a decision on whether to increase or decrease
its nearly 20 percent stake in the Vancouver-based company on
knowing how much support the plan had drawn when shareholders
voted in May.
The plan, which Telus withdrew when it became clear that
Mason could block it, would have given a non-voting class of
shares the same status as the more valuable voting shares.
As a short-seller of the non-voting stock, Mason likely made
money by blocking the deal as it knocked the non-voting share
price lower. The hedge fund could profit again if Telus revives
the measure as it says it may do.
While it is not immediately clear what Mason's end-game is
in filing the petition to the Supreme Court of British Columbia,
its continued presence on the Telus shareholder list could
stymie Telus' efforts to reintroduce the plan.
Canaccord Genuity analyst Dvai Ghose said Mason's petition
could push Telus to pay voting shareholders a premium in any
Mason has hired Blackstone Group LP to seek out a buyer for
the stake, a source told Reuters in June, though it is not clear
whether it would want to sell at this stage.
In the petition, dated May 10, Mason's lawyers asked for
unredacted copies of the proxies submitted by holders of the
voting stock. Mason said Telus had provided copies but
information related to the proposal had been obscured, making it
impossible to determine how investors had voted.
Mason had bought 19 percent of Telus' voting shares ahead of
the planned vote. The fund had borrowed a much larger number of
non-voting shares and likely benefited as their value fell after
Telus withdrew the vote.
At the time, Telus said that excluding Mason's opposing
vote, the proposal would have been approved by both classes of
shareholders with a total of 92.4 percent in favor.
The filing showed that Mason has since slightly added to its
position, which is now at almost 20 percent. It did not say how
many borrowed non-voting shares it still held.
"EMPTY VOTING STRATEGY"
Telus said it opposed the filing.
"This is just another tactic by Mason to try to advance
their empty voting strategy in the interests of their own
short-term profits at the expense of our other shareholders,"
spokesman Shawn Hall said in a statement.
Telus put its dual-share structure in place to comply with a
law limiting foreign control of Canadian telecom companies at a
time when U.S.-based Verizon Communications Inc was a
The law limits foreign direct ownership in a major carrier
to 20 percent. It also bars foreigners from owning more than a
one-third interest in the carrier's parent company.
The Canadian government recently passed legislation that
enables a foreign buyer to control a telecom company with less
than a 10 percent market share, a change that does not apply to
One of those smaller telecoms, Globalive, has asked a
regulator to study whether Telus has breached the rules.
If Telus is shown to have violated the foreign ownership
limits, it could endanger its bids on valuable wireless spectrum
in an auction due next year, Laurentian Bank Securities' Ron
Mayers told BNN television.
Both Telus' voting and non-voting shares fell 1.6 percent on
Wednesday, with the voting stock closing at C$62.23 and the
non-voting finishing at C$61.00 on the Toronto Stock Exchange.