Critchley: Putting investors at the corehttps://www.financialpost.com/opinion/columnists/Putting+investors+core/4954079/story.html
Putting investors 'at the core'
Barry Critchley, Financial Post · Jun. 16, 2011 | Last Updated: Jun. 16, 2011 2:04 AM ET
On two occasions in the past year, shareholders of Unique Broadband Systems Inc. have shown their extreme displeasure with the former management group at a company in wind-down mode whose main asset is a 38% stake in LOOK Communications.
The first time was last July when a group of dissidents -led by Grant McCutcheon, Robert Ulicki and Henry Eaton -secured enough support to remove the former board. Soon after that, the former insiders launched legal action against their former employer claiming $13.4-million for termination payments. (UBS has filed counter-claims.)
The second time was earlier this year when the former management group, which included Gerry McGoey and Alex Dolgonos, tried to mount a comeback at UBS's annual meeting. Again the old team was rebuffed by shareholders.
Now at least one member of the former management group is about to make a third attempt. Earlier this month, UBS announced that a corporation or corporations controlled by Dolgonos "intends to make a partial takeover bid for the shares of UBS, on or after July 6, 2011." While the terms of the proposed offer have not yet been disclosed, UBS said it "will evaluate the offer upon its receipt and will provide feedback to shareholders in due course," while noting that it "may also consider other alternatives."
To Ulicki, UBS's chairman, the proposal has some ominous signs. "If he puts forward a partial takeover bid and is successful in having 20%-25% of the shares tender, he will be in a position to change the board. With the change in the board, we will then have the ironic position of Dolgonos being in a position to judge the merits of his own lawsuit and determine the outcome," given that he will be moving to the role of plaintiff and judge from just being the plaintiff.
Ulicki argues that the regulators -either the Autorité des marchés financier in Quebec or the Ontario Securities Commission -have a role to play. "Will the OSC see through this plan, which we don't think is in the best interests of shareholders?"
Ulicki also noted the convenient date of the proposed offer. It is set to be launched one year plus a day after the former insiders were voted off the board. There is at least one favourable consequence of the chosen date: A valuation is not required because Dolgonos is not deemed to be an insider. Dolgonos would have been deemed an insider had he made partial offer within one year and responsible for funding the cost of that valuation.
Ulicki also worries some of UBS's 13,000 shareholders may tender, if an offer is forthcoming, out of fatigue and the desire to bring an end to their involvement in UBS -despite the merits of the legal action against the former insiders.
What is known is that shareholders are frustrated. They also wonder when the OSC will live up to the commitment made by its new chairman Howard Wetston, soon after being appointed of putting the interests of investors "at the core" of everything the commission does.
Some have written to the regulators asking/begging that they get involved to "restore shareholder value" in the wake of the large payments (at least $23-million) made to former directors, executives and officers of LOOK following the net $64-million sale of its spectrum assets. "As one of many shareholders, I implore you to exert jurisdiction and protect our interests and the integrity of the capital markets," said one.
Over to you, Howard.
bcritchley@nationalpost.com
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