Topic: Proxy Battles

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Canada and France: Will legislative changes reduce hostile bids?

While the Canadian Securities Administrators’ (CSA) proposed changes to the hostile take-over bid regime have been discussed extensively in Canada, a series of similar legislative changes in France have received relatively little coverage. Although attained by different means, both changes point towards a potential shift in power from hostile bidders and activist shareholders to target boards. While the full extent of these changes have yet to materialize, an understanding of both regimes will help readers analyze their impacts and apply them to the Canadian context.

Canada: Proposed Measures

On March 31, 2015, the CSA published proposed amendments to Canada’s take-over … Continue Reading

Demonstrated impropriety, not mere speculation, required to warrant appointment of independent chair: Ontario court

The Ontario Superior Court of Justice (Commercial List) recently confirmed that “demonstrated impropriety” is required to warrant court intervention in the appointment of an independent chair of a shareholders’ meeting in a proxy contest. In Meson Capital Partners, LLC v Aberdeen International Inc. (Aberdeen),[1] Norton Rose Fulbright Canada’s Special Situations Team successfully represented the Special Committee of Aberdeen International Inc. (the Company) on an Application brought by Meson Capital Partners, LLC and Nightscape Capital (UK) LLP (together the Dissidents) for relief in respect of a special meeting of the shareholders of Aberdeen (the Meeting).… Continue Reading

Institutional investors strongly support shareholder activism, according to new study

Institutional investors represent perhaps the most important segment of shareholders that both management and dissidents must appeal to in the course of an activist campaign.

A new study of institutional investors published by FTI Consulting, Inc. (the Study), a leading US-based corporate consultancy firm, reveals interesting findings about the attitudes of such investors toward shareholder activism.  The Study, which surveyed over 100 institutional investors representing $1.7 trillion in assets, shows that institutions have become increasingly engaged in their portfolio companies and more supportive of activist shareholders.

A strong majority of institutional investors now view shareholder activism positively, with 76% … Continue Reading

US Chamber of Commerce releases practice guidance for public companies dealing with proxy battles

The US Chamber of Commerce recently released a white paper authored by Harvey Pitt, former Chairman of the US Securities and Exchange Commission (SEC).  The white paper, Public Company Initiatives in Response to the SEC Staff’s Guidance on Proxy Advisory Firms” (the Paper), provides public companies with suggested focus areas for dealing with proxy voting in light of the SEC Staff Bulletin released in June 2014.

On the date that the Paper was released, Pitt addressed the US Chamber of Commerce at a conference on corporate governance and the 2015 proxy season. As reported here, Pitt told … Continue Reading

Proxy solicitation: Not a matter of right in Alberta

The increasing prevalence of shareholder activism in Canada has significantly impacted issuers and investors alike in the Canadian capital markets.

Consequently, an understanding of the Canadian regulatory landscape governing activist activities has become increasingly important for both sides of an activist struggle. A key element of this understanding is acknowledging that the regulatory landscape is not always uniform from province to province.

Proxy solicitation in respect of Alberta corporations which are reporting issuers is governed under two legislative schemes: Part 12 of the Business Corporations Act (Alberta) (the ABCA) and Part 9 of National Instrument 51‑102 – Continuous Disclosure Continue Reading

Corporate Governance 2014: Corporate Governance in Special Situations

Norton Rose Fulbright Canada LLP and Lexpert will again be co-hosting two full-day seminar sessions entitled “Corporate Governance 2014: Corporate Governance in Special Situations” on December 4th (Toronto) and December 8th  (Calgary). These seminars will include discussions on corporate governance developments in special situations, with specific focus on the trends, tools and defences used during proxy fights, M&A transactions, and situations of financial distress.

The seminars will be co-chaired by our partners, Walied Soliman and Orestes Pasparakis, who will be joined by the following speakers.

Norton Rose Fulbright Speakers:

  • Ava Yaskiel, Partner
  • Justin Ferrara, Partner
  • Cathy
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‘Wolf Packs’ and Other Recent Trends in Hedge Fund Activism

The recent increase in hedge fund activism is “hyperbolic” and should be carefully assessed, according to two notable scholars, John C. Coffee Jr. (corporate law; Columbia) and Darius Palia (corporate finance; Rutgers), who have just published on comprehensive study on hedge fund activism entitled, “The Impact of Hedge Fund Activism: Evidence and Implications.” The authors address various perspectives on the benefits and repercussions of hedge fund-led corporate change, relying on statistical analysis and market data to answer four questions:

  • Who are the targets of activism?
  • Does hedge fund activism create real value?
  • What are the sources of gains
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ISS Updates its Proxy Voting Guidelines for the 2015 Season

On November 6, 2014, Institutional Shareholder Services (ISS) released updates to its Canadian proxy voting guidelines for the 2015 proxy season.  The voting guidelines are effective for meetings held on or after February 1, 2015.  The following is a summary of the most significant changes.

Director Elections

  • Director Independence: ISS has made several changes to their definition of “independence” including:
    • that former CEOs will now be subject to a five year “cooling off” period, after which ISS will classify him/her, on a case-by-case basis, to be independent unless other relationships exist with the issuer or executive officer. Factors taken
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2014 Q3 Proxy Update

The 2015 proxy season is fast approaching, PwC and Broadridge released a quarterly research report  which reviews proxy related data from 4,113 shareholder meetings
held between January 1 and June 30, 2014 and  highlights several themes and trends that may inform how shareholders and companies will interact on four key issues:

Director Elections: Director elections continue to attract widespread voting, with 93% of elections at large companies garnering votes between 90-100%. In contrast, only 75% of voted shares were cast in the 90-100% range for small-cap firms. Moreover, of the 22,554 directors up for election, roughly 5% failed to … Continue Reading

Defensive Tools in Shareholder Activism: The “Voting Pill”

In today’s Financial Post,  Barbara Shecter highlighted the use of modified shareholder rights plans (colloquially known as “poison pills”) as an emerging defensive tool against opportunistic shareholder activism in Canada.  Traditionally, poison pills are used by boards of target companies as defensive tools to guard against unsolicited takeover bids.  By expanding the typical definition of “beneficial ownership” in a poison pill (which is typically limited to concepts of ownership and is used to determine whether the poison pill is triggered) by including securities that a shareholder does not own but has a right to vote or the right to … Continue Reading

Enhanced Disclosure Requirements on Women in the Boardroom

The securities regulators in 7 provinces and 2 territories announced on Wednesday, October 15, 2014, that the final version of the amendments to National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101) and Form 58-101F1 Corporate Governance Disclosure (Form 58-101F1) would include stringent requirements pertaining to female representation on boards and in executive officer positions. Securities regulators in Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Quebec and Saskatchewan have all signed on to the long-awaited amendments.

Disclosure Requirements

The enhanced disclosure requirements pertaining to females on boards, while significant, … Continue Reading

Golden Leashes: Is Regulatory Intervention Warranted?

In the most recent volume of the Canadian Business Law Journal, Edward M. Iacobucci, Professor with the Faculty of Law at the University of Toronto, addresses certain arguments against dissident shareholders providing their director nominees with a future incentive if the target company’s share price increases following such nominee’s election to the board.1  These special compensation arrangements (or “golden leashes” as they are sometimes called) are hereafter referred to as “arrangements” and first emerged in Canada during the 2013 Agrium/Jana proxy fight, which was recently discussed by my colleague, Saeed Teebi, here.

Iacobucci explores some of the arguments … Continue Reading

CSA Drops Early Warning Report Proposals

The Canadian Securities Administrators (the CSA) provided an update today on its proposed amendments to the early warning system regime. Specifically, the CSA announced that it has determined that they will not proceed with: (a) the proposal to reduce the reporting threshold from 10% to 5%; and (b) the proposal to include “equity equivalent derivatives” for the purposes of determining the threshold for early warning reporting disclosure.

The CSA made their determination, in part, based on the views expressed by various market participants in the over 70 comment letters that the CSA received, which included views of concern about: … Continue Reading

A Changing Climate for Proxy Advisory Firms: Developments in the US and Canada

The role of proxy advisory firms in the marketplace has been a focal point on both sides of the border as recent guidance by the US Securities and Exchange Commission (SEC) and the Canadian Securities Administrators (CSA) highlights the powerful influence of proxy advisory firms and need for increased accountability and transparency.

In the US, the SEC Staff released a bulletin in June entitled Proxy Voting: Proxy Voting Responsibilities of Investment Advisers and Availability of Exemptions from the Proxy Rules for Proxy Advisory Firms (the Bulletin) which places some onus on the investment advisor, as … Continue Reading

Trends and Predictions in Canadian Proxy Contests

Kingsdale Shareholder Services has released its 2014 Proxy Season Review.  In its report, Kingsdale discusses trends observed in 2014, predictions for the future, and gives its key recommendations for companies in the Canadian marketplace.  In reviewing 2014 and comparing it to the previous year, Kingsdale observes:

  • By the numbers – the total number of proxy contests observed in 2014 remained at the elevated level seen beginning in 2008, but was down slightly from 2013.  Kingsdale suggests a number of factors for the relative decline, including stronger capital markets which have helped to mask under-performers’ deficiencies, the implementation of structural
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Canadian Securities Administrators to Propose Amendments to Canadian Take-over Regime

The Canadian Securities Administrators (CSA) have announced that they intend to publish for comment significant amendments to the Canadian take-over bid regime in the first quarter of 2015. The amendments are an initiative of all CSA members and are intended to strike a fair balance between the interests of bidders and the boards of directors and shareholders of target issuers in hostile take-over bids.

While the proposals do not recognize a target board’s right to “just say no” to and block a hostile bid, the proposals will provide boards of directors of target issuers with additional time to respond to … Continue Reading

Shareholder Activism in 2014: Half Year Review

Activist Insight recently released its half-year review.  Activist Insight, which provides market analysis and chronicles critical developments in activist investing, made the following observations regarding U.S. activist investing trends for the first half of 2014, including:

  • While the US continued to dominate public instances of activism (with 127 campaigns initiated), a significant number were waged throughout Europe, Canada and the rest of the world.
  • The average US stock held by an activist for at least two months in H1 2014 appreciated by an annualized 51.0%*, compared with 16.4% for the S&P 500.
  • The proportion of activists seeking board representation
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The Rise of Policy Activists?

In a recent twist on activist investing, People for the Ethical Treatment of Animals (PETA) purchased shares in SeaWorld in an effort to address conduct it considers animal cruelty.  According to PETA, it bought “the smallest number of shares necessary” to give it “the right to attend and speak at annual meetings and to submit shareholder resolutions asking for policy changes”.

SeaWorld is not the only corporation PETA has claimed ownership in.  PETA is using this same strategy with companies such as General Electric, Schering-Plough and 3M, and with fast food restaurants like McDonald’s and Wendy’s.  Although … Continue Reading

Shareholder Activism in M&A: 2014 Trends

Buoyed by an improved economic climate and unprecedented success in 2013, shareholder activists are expected to significantly influence the 2014 M&A landscape. As shareholder activism becomes more widespread, activists are becoming increasingly ambitious and creative in their approach.

Last year saw a rise in the power and influence of activist hedge funds. In 2013, activist hedge funds managed over $93 billion, a 42% increase from 2012. With more capital, activist hedge funds have been able to target larger and more sophisticated companies.

Shareholder activists are also looking to expand their geographic reach. Despite confidence in the North American market, in … Continue Reading

The Polarizing Effect of National Policy 25-201

In our recent post on June 24, 2014, we reported that the Canadian Securities Administrator (CSA) published for comment proposed National Policy 25-201 Guidance for Proxy Advisory Firms (NP 25-201). At its core, the purpose of NP 25-201 is to set out non-prescriptive guidelines for proxy advising firms to address issues relating to conflicts of interest, transparency, reporting standards and public consultation. Some issuers are concerned that NP 25-201 lacks the regulatory teeth to ensure compliance while certain institutional investors feel the policy is unnecessary and inefficient, suggesting that issuers take it up with their investors instead.… Continue Reading

Shareholders Shaking Up Japan

A Japanese research firm suggests that there may be a record 14 shareholder proposals (all with the intention of creating higher returns) that will be made in the next few weeks as annual general meeting season begin in Tokyo and elsewhere.

Why is this surprising? In the past it has been uncommon for shareholders in Japan’s institutions to oppose company resolutions. Activists were considered ‘bad guys.’ What has changed this dynamic is the creation of the Stewardship Code (the “Code”) under the tutelage of the economically driven Prime Minister Shinzo Abe. In force since May, it already has been followed … Continue Reading

Ontario Court Sheds New Light on Advance Notice Bylaws

In its recent decision in Orange Capital, LLC v Partners Real Estate Investment Trust, 2014 ONSC 3793, the Ontario Superior Court has offered new guidance on the interpretation of advance notice provisions used in the context of a proxy contest.  The decision is another victory for Norton Rose Fulbright’s Special Situations team, which represented Orange Capital in this litigation.

In April 2014, Partners Real Estate Investment Trust (the REIT) announced that its annual and special meeting of unitholders (the Meeting) would be held on June 26, 2014.  The REIT later postponed the Meeting to July 15, 2014.  … Continue Reading

Can Activist Shareholders Spur Innovation in the Technology Sector?

Activist shareholders have been accused of hindering innovation in companies they target. During a 2-3 year activist engagement in a company, activist shareholders focused on pursuing short-term goals may seek to cut costs in the target, maximize profits, then exit quickly, (possibly) with little care for the long-term prospects of the target company. In Hedge Fund Activism and Corporate Innovation (the Paper), He, Qui and Tang (the Authors) argue that is not necessarily the case, and that in fact activist shareholders can and do spur innovation, especially in the technology sector.

Innovation, the Authors explain, is a key … Continue Reading

Battles for Control of a Company: Practical Lessons from Wells v. Bioniche Life Sciences Inc.

In Wells v. Bioniche Life Sciences Inc., a group of dissident shareholders attempted to gain control of Bioniche Life Sciences Inc. (the “Company”) by requisitioning a shareholders’ meeting to replace the Company’s management. Bioniche’s Board of Directors resisted the Dissidents, and the parties eventually came before Justice D. M. Brown of the Ontario Superior Court of Justice to have him determine several issues relating to a shareholder’s right to requisition or call meetings under s. 143 of the Canadian Business Corporations Act.  An article summarizing Justice’s Brown’s findings and analyzing the practical implications of the decision was recently … Continue Reading

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