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Telus-Mason proxy row heading back to court

A Telus store in Toronto.

Michelle Siu/The Globe and Mail

The U.S. hedge fund that has been waging a months-long proxy battle with Telus Corp. is heading back to court in its latest effort to block the telecom company's share-consolidation plan.

Mason Capital Management LLC has been granted an expedited hearing for its appeal of a recent decision by the Supreme Court of British Columbia that prevents it from holding a rival meeting of Telus shareholders next month.

In the B.C court system appeals are automatically heard.

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The New York-based hedge fund announced Tuesday that its appeal is scheduled to be heard at a hearing on Oct. 4 at the British Columbia Court of Appeal. That fast-tracked appeal process should enable the court to issue a decision settling the long-running dispute before Telus holds a special meeting of its shareholders on Oct. 17.

Last week, a judge from the Supreme Court of British Columbia issued a decision that prevents Mason from holding its own meeting of Telus shareholders on Oct. 17. The hedge fund originally called that meeting, which was to be held during the morning of that day, to give investors a chance to endorse its proposal to secure a minimum premium for voting shareholders if Telus eliminates its dual-class share structure. The move was designed to obstruct Telus's afternoon meeting at which investors are due to vote on the company's proposal.

Mason, which owns just under 20 per cent of Telus's voting shares, opposes the Vancouver-based telecom's revived share-consolidation plan to convert all non-voting shares to voting shares on a one-for-one basis. It argues that voting shareholders deserve an incentive because they have historically paid more for their shares which give them the right to vote on key matters such as the election of board members.

"Mason believes it has strong grounds of appeal, and that it is critical that the owners of the Telus voting shares have the opportunity to vote on a binding change to Telus' articles that would establish an appropriate minimum premium for voting shares in a dual class collapse transaction," the investment firm said in a statement.

For its part, Telus accuses Mason of being an opportunistic investor that is trying to profit from an "empty voting" trading strategy. That's because Mason has a short position in Telus's non-voting shares that is almost as large as its ownership of voting shares – meaning its net economic interest in the company is negligible. As a result, Mason stands to make money if it can succeed in widening the spread between the two classes of shares.

"The original court decision was strong. We are confident their appeal will fail," Telus spokesman Shawn Hall said.

"Rather than continue trying to confuse matters and frustrate a properly called meeting of our shareholders, if Mason really believes an exchange should proceed on a different exchange ratio they should cease their court proceedings and simply cast their votes at our meeting."

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During morning trading on the Toronto Stock Exchange, both share classes made gains, putting the spread between Telus's voting and non-voting shares at just 50 cents.

This is the second time this year that Telus has attempted to abolish its dual-class share structure. In May, it was forced to nix an earlier proposal just hours before a shareholder vote at its annual general meeting when early voting results, which reflected Mason's sizeable stake, made it clear that the proposal was doomed to fail.

This time around, however, Telus has lowered the approval threshold to ensure the proposal's success. As a result, only a simple majority of the votes cast by its voting shareholders, or 50 per cent plus one, will be needed for the measure to pass. That compares to the previous requirement of two-thirds support from the voting class.

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