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Takeover bid for Torstar spurs complaints to Ontario Securities Commission
Disgruntled minority shareholders have submitted complaints to the Ontario Securities Commission, alleging that a takeover bid favoured by Torstar’s board and the company’s biggest shareholders left money from a higher bid on the table, and that a major shareholder is in a conflict of interest.
The favoured bid, from Toronto entrepreneurs Jordan Bitove and Paul Rivett through their company NordStar, was raised to 74 cents per share Saturday evening. The five families which control Torstar’s A-class shares, as well as Fairfax Financial — which controls 40 per cent of Torstar’s B-class shares — both signed “hard lock-ups” supporting the deal Saturday, preventing them from switching their support to any other offer.
Rivett was a longtime executive of Fairfax before retiring. He subsequently joined forces with Bitove for the bid.
The NordStar bid beat out a rival 72-cent-per-share proposal made through Canadian Modern Media Holdings.
“The OSC has received shareholder complaints in relation to the Torstar bid and we’re unable to comment further. This is to ensure the complaint process is not used to affect the market and to promote fairness towards those who are the subject of a complaint or review,” an OSC spokesperson said in an email Wednesday.
Torstar chairman John Honderich declined to comment on the complaints to the OSC. There was no immediate response from NordStar.
A July 21 meeting where shareholders are being asked to vote on NordStar’s offer is still scheduled to go ahead. The NordStar deal is contingent on getting a majority of votes from A-class shareholders and B-class shareholders, as well as 66 per cent of the votes from both classes added together.
According to legal sources, the OSC has the power to issue a cease-trade order for up to 15 days while it investigates the complaints, potentially stopping or delaying the July 21 meeting.
The proposal from Canadian Modern Media Holdings was submitted by a group which includes Matthew Proud, CEO of Dye & Durham Corp., his brother Tyler Proud, CEO of technology company Avesdo Inc., finance industry veteran Neil Selfe and former Ontario finance minister and Ontario Liberal Party president Greg Sorbara.
After the improved NordStar bid became public Saturday, Selfe told the Star he had been prepared to go as high as 80 cents per share with his offer.
CMMH had been facing a deadline of 5 p.m. this past Monday to make their bid official, but NordStar upped their bid Saturday in a pre-emptive strike.
A letter to OSC director Naizam Kanji from B-class shareholder Pat Collins urged the OSC to investigate the circumstances of the deal.
“The offer outlined by Canadian Modern Media at $1.30 represents a significant premium over the $.74 offered by NordStar,” wrote Collins, who added that he owns more than 1.1 million shares. Collins is former publisher of the Torstar-owned Hamilton Spectator. The $1.30 price mentioned by Collins includes 80 cents per share in cash, and values the contingent value rights included in the offer at 50 cents per share (the actual value may vary).
Juan Carlos Haas, a minority B-class shareholder based in Germany, said Fairfax Financial’s votes shouldn’t be included in any tally of B-class shares, because Rivett was a long-time executive at Fairfax before joining Bitove as part of the NordStar bid.
“Fairfax Financial should be excluded from the vote at the Special Meeting of Shareholders on July 21, because it is a ‘Joint Actor,’” Haas said in a letter of complaint to the OSC. In an interview with the Star, Haas, who described himself as a value investor who looks for undervalued assets to buy at a discount, said the A-class shareholders and Fairfax shouldn’t have signed hard lock-ups when there was potentially richer deal on the table. “It’s unfair. You shouldn’t sell other people’s money,” said Haas.
Torstar B-class shareholders normally would not have a vote in corporate decisions. But the NordStar bid is subject to approval by a majority of A-class shareholders and a majority of B-class shareholders, in addition to two thirds of all shares added together.