Despite management’s attacks on Mason Capital, it cannot answer the basic question: “What it the value of the right to control TELUS?” Diversionary tactics aside, TELUS is left in the embarrassing position of having to argue that this fundamental shareholder right is worth what the Company proposes to pay for it: NOTHING.
Mason has fully disclosed its investment positions, including hedging positions, all of which express with maximum economic impact Mason's conviction that the Voting shares are worth more than the Non-Voting shares. Mason's investment positions are entirely appropriate and it intends to assert its full rights as a shareholder of TELUS. It is remarkable that instead of working to remedy the problems with the TELUS proposal that Mason has highlighted, management has adopted a take-it-or-leave-it stance and focused all of its efforts on attacking Mason.
Michael E. Martino, Principal and Co-Founder of Mason Capital, said, “Instead of fixing the plan to make it fair to all shareholders, TELUS management has been wasting time and resources making gratuitous attacks on Mason. TELUS should revisit or abandon this misguided proposal. Common shareholders ascribe great value to their voting control and believe it is worth more than they paid for it. TELUS’ proposal destroys this substantial value to the detriment of an entire class of shareholders, not just Mason. TELUS’ tactics are particularly hypocritical in light of its own recent announcement that it will use the company’s money to pay for shareholder votes, but only those that are in favour of its proposal. This conduct is abusive of TELUS shareholders such as Mason who disagree with management’s position.”
About Mason Capital:
Mason Capital is a New York based investment fund with offices in New York, London and San Francisco and has been in business since 2000. Mason Capital has a long history of investing in Canada. It is the largest shareholder and is represented on the board of directors of ATS Automation Tooling Systems, a TSX-listed company.
The text of the public statement to TELUS shareholders is as follows:
Dear Fellow TELUS Shareholders:
Last week we issued a statement outlining the reasons we intend to vote against TELUS’ proposal to convert all of its Non-Voting shares into Voting shares on a one-for-one basis. Nothing has changed since that time, including our strong belief that the TELUS proposal is critically flawed.
At the heart of our decision to vote against the proposal are three simple but very important facts:
1. Votes Are Valuable. There is no dispute that holders of the Voting shares have more rights – the right to vote, to control the board, to control the Company and to convert into Non-Voting shares of TELUS from time to time at the OPTION of the Voting shareholder. We refuse to let TELUS trivialize the distinctive value of the Voting shares – voting rights are the foundation of the Company’s corporate governance and are a privilege exclusively owned by the holders of the Voting shares.
2. Holders of the Voting Shares Paid a Premium for Their Rights. Buyers of Voting shares have consistently paid a premium over a long period of time for their right to elect directors and to make other important decisions affecting the Company. This premium has averaged 4% to 5% over any relevant time period in the five years before TELUS announced its Proposal, and has been as high as 10%. If anything, that premium has only increased during that period and become more consistent.
3. TELUS’ Proposal Takes Away these Valuable Rights for No Consideration. Given the significant value carried by the ability to vote and the premium paid historically by holders of the Voting shares, TELUS’ one-for-one proposal is a gift to the Non-Voting shareholders. Investors in each class of TELUS shares for many years have made an informed decision to either pay more for Voting stock or less for Non-voting stock. It is unfair for TELUS to take away the rights that the holders of the Voting shares have paid for without any compensation whatsoever and confer a windfall benefit on the holders of the Non-Voting shares.
Despite these undeniable facts, TELUS management persists in its attempts to justify this misguided proposal instead of working toward a proposal that all shareholders could accept. TELUS management’s purported justifications for pursuing this proposal are entirely without merit:
TELUS’ proposed conversion plan does absolutely nothing to improve the value of TELUS, as the operations, earnings and prospects of TELUS are untouched by the proposed share conversion.
TELUS does not have a liquidity problem today.
TELUS has offered NO evidence that the transaction will increase liquidity.
The proposed conversion will in fact hurt liquidity.
The proposed conversion may result in immediate and serious adverse impacts on non-Canadian holders.
TELUS has provided no public disclosure on its current foreign ownership levels or the consequences for non-Canadian shareholders if the permitted levels are exceeded.
TELUS’ view that a one-to-one conversion ratio is justified on the basis of the articles is entirely without merit.
TELUS' flawed plan is derived from a flawed process.
Lastly, you should be aware that your broker or financial advisor is being paid a fee by TELUS if you vote FOR the proposed arrangement but will NOT be paid if you vote AGAINST the conversion. Should you receive a call from your broker or financial advisor encouraging you to vote for the conversion, you should enquire about these fee arrangements. Your broker or financial advisor has a fiduciary duty to represent your best interests and should not be receiving compensation from third parties to encourage you to take action that may not be in your best interests.
As we have said previously, we would favorably consider a revised proposal that properly reflects the inherent value of the Voting shares and is structured, to the extent practical, to avoid adverse effects on foreign ownership and liquidity. There is nothing stopping TELUS from proposing an exchange ratio that recognizes the full value of control owned by the Voting shares. If management continues to refuse to remedy these fundamental defects in the proposal, we intend to vote AGAINST it. If you have any questions in voting your BLUE proxy AGAINST the conversion please call Kingsdale Shareholder Services toll-free 1-888-518-1565.
Mason Capital Management LLC
Michael E. Martino
Principal and Co-Founder