The Canadian Foundation for Advancement of Investor Rights, also known as FAIR Canada, is urging the OSC to examine whether the deal is being carried out in a manner that is unfair to minority shareholders and contrary to the public interest after a group of minority shareholders filed a complaint with the OSC last month.
Recent impressive quarterly earnings have led those shareholders to express concerns that the proposal to make the satellite radio company private is underselling the company’s market value.
The privatization offer rates Sirius Canada’s value at $4.50 per share in cash or stock, and was first announced in May.
Last month, the company reported third-quarter earnings exceeding projections. Revenue grew by 3.5 per cent to $86 million, and the number of Sirius Canada’s total subscribers climbed 3.5 per cent to 2.75 million. Its earnings came in at $7.2-million, or 6 cents a share, a decline of 9.3 per cent from the same quarter in the previous year.
In addition to raising concerns about a flawed valuation of the company’s shares, the complaint to the OSC alleges the proposed transaction is coercive because Sirius Canada’s board suspended payment of quarterly dividends while the privatization transaction is being considered.
The complaining shareholders are also making the case that one minority shareholder, the Canadian Broadcasting Corporation, should not be permitted to vote in a “majority of the minority” approval ballot because, unlike other minority shareholders, the CBC will likely still benefit from an existing business relationship with Sirius Canada after privatization.
Sirius Canada investor relations VP Kirsten Dickson told the Financial Post that FAIR Canada’s call refers to a “meritless complaint of a dissident group” and said the company has responded in full to the OSC regarding the complaint.
Dickson pointed to a Glass Dickson report which recommended that shareholders vote for the transaction, noting the firm said it “represents the most logical and attractive option for minority shareholders.”
However, a different report by the advisory firm International Shareholder Services Inc., announced by a group of shareholders holding approximately 8.4 million Sirius Canada class A shares, recommended voting against the proposed privatization. ISS criticized the deal for lowballing the company’s valuation and urged shareholders to vote against it given Sirius Canada’s historic revenue growth and management’s own projection of continued revenue growth.
“These are all serious concerns that warrant scrutiny in a public hearing,” said FAIR Canada, in a media release. “The protection of minority shareholders’ rights is critical to preserving confidence in Canada’s capital markets, and the OSC ought to examine the proposed Sirius Canada privatization to assess whether it is being carried out fairly and in a manner consistent with the public interest.”
“We’re not taking a position one way or the other on it,” FAIR Canada’s Executive Director Neil Gross said, in an interview with the Financial Post. “But we do feel it warrants a public hearing because the allegations raised are serious and significant enough that they deserve a public hearing.”