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Activist Highfields no stranger to Canada (or Tims)

Tim Hortons is exactly the type of company we would expect to show steady dividend growth, but there are lesser known firms that deserve a look.

Chris Bolin/The Globe and Mail

The name Highfields Capital Management, the hedge fund seeking changes at Tim Hortons, doesn't ring as many bells as Bill Ackman's Pershing Square Capital Management or Dan Loeb's Third Point Capital, but it's certainly no lightweight in the activist world.

Nor is it some carpetbagging opportunist poking its head north of the U.S. border simply because it wants to have some fun in a new market.

Based in Boston, Highfields is a venerable name and manages money for the likes of Massachusetts' pension funds. The vocal activist, now pursuing a share buyback at Tim Hortons, not only has a lengthy history in Canada but also knows Tims well.

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A summary of Highfields' big splashes in Canada:

2004
Manitoba Telecom Services proposes to buy Allstream Inc.. Toronto hedge fund Enterprise Capital opposes the deal and lights a fire under management, arguing that the takeover should be put to a shareholder vote. Highfields backs Enterprise up, as do a slew of big name Canadian funds. Ultimately they're rebuffed by the TSX and the Allstream acquisition goes through – something that still haunts MTS today.

2005
Highfields stands out as one of the vocal minority shareholders who opposes the Molson-Coors merger, alongside Jarislowsky Fraser and former deputy chairman Ian Molson. Highfields argues that the beer industry is in a major wave of consolidation and other major rivals may be interested in bidding, which could lead to a higher price. The Coors deal goes through.

2006
Great Canadian Gaming Corp. issues a chunk of stock to its chief executive officer at a heavily discounted price. Highfields writes the Toronto Stock Exchange, arguing the offering is "one of the most extraordinary transfers of wealth to a public company insider that we have ever seen." That's as far as they got. The TSX rules that the private placement is above board and closes the matter.

2009
Highfields is one of a few angry shareholders, including West Face Capital, who argue Total SA's bid for UTS Energy Corp. is much too cheap. The deal eventually goes through, but Total ends up paying $1.5-billion -- more double its original offer.

However, the deal that is most relevant to the latest requests at Tim Hortons is Highfields' support of the coffee chain's initial public offering.

When Wendy's International, which bought Timmy's for $300-million (U.S.) in 1995, was mulling its options after a few years of stagnant growth, Highfields was one of a few shareholders who argued the Canadian chain should be spun out in a public deal. Pershing Square, by contrast, wanted Wendy's to restructure. We all know who won.

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Now Highfields is interested in the coffee chain again. And according to a new Reuters report, it looks like its willing to put some money where its mouth is. According to the company's latest regulatory filing, Highfields owned only about 1.5 per cent of Tim Hortons. The stake is now reportedly around 4 per cent.

(Tim Kiladze is a Globe and Mail Reporter.)

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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