Mar 8, 2016
OSC denies Catalyst's bid to block Corus-Shaw deal
Regulators block attempt to delay Corus-Shaw vote
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Ontario’s securities regulator has denied a last-minute bid by Catalyst Capital Group Inc. to delay a shareholder vote on Corus Entertainment Inc.’s (CJRb.TO 0.1%) proposed $2.65-billion acquisition of Shaw Media (SJRb.TO).
A three-member panel of the Ontario Securities Commission (OSC) heard arguments Monday on whether Catalyst had the proper standing to force a full hearing on issues related to Corus’s disclosures surrounding the deal.
In brief remarks after the panel said it would not grant Catalyst standing, OSC vice-chair Grant Vingoe noted the commission was not considering the adequacy of the disclosure at this time. But he added that there has already been a public discussion of concerns surrounding the transaction.
“We’re not persuaded that granting standing to Catalyst would lead to an outcome that would be beneficial to minority shareholders that has not already been achieved by other actions taken by the applicant and by market analysis of the transaction itself. There has been a vigorous debate in the marketplace,” Mr. Vingoe said.
Toronto-based private equity firm Catalyst bought about 320,000 – or 0.4 per cent – of Corus’s Class B shares after the deal was announced in mid-January.
Over the past several weeks, the firm has conducted a public campaign seeking to persuade fellow minority shareholders to vote against the transaction at a special meeting on Wednesday.
Both Corus and Shaw Media’s owner, Shaw Communications Inc., are controlled by the Shaw family of Alberta and the deal requires the approval of a majority of minority shareholders.
Founded in 2002 by Newton Glassman, Catalyst says it now manages assets worth $6-billion (U.S.). It has long invested in distressed debt situations and the firm’s partners say its move to intervene in the Corus deal is an attempt to bring its activist approach to the equity markets.
Catalyst filed its application with the OSC on Friday and the commission heard procedural arguments that day.
Larry Lowenstein, a lawyer for Corus, argued Monday that Catalyst’s 11th-hour application was not in the public interest and allowing a full hearing would have broader negative effects. He said it could encourage similar applications by minority shareholders with little at stake and create uncertainty for parties making deals.
Catalyst is “trying to put a patina of public interest on what is really nakedly a private arm wrestle,” Mr. Lowenstein said.
He called Catalyst’s campaign “brand building” and said while the firm is perfectly entitled to bring an activist approach to bear, the OSC and its procedures should not be used as a tactical tool.
Robert Staley, counsel for Catalyst, countered that activists like Catalyst can reap benefits for other shareholders and hold management to account.
He argued that since Corus set March 31 as the deadline to hold a shareholder vote, there was still enough time before then to hold a full hearing on the adequacy of disclosure.
“I understand why Corus doesn’t like activists,” Mr. Staley said. “But the reality here is that there are legitimate issues raised,” he added, arguing Corus has not made sufficient disclosures.
Shaw Communications plans to use the proceeds from the sale of its media assets – which include the Global television network and a suite of specialty television channels – to pay for its recent $1.6-billion acquisition of startup wireless carrier Wind Mobile Corp., which closed last week.
