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	<title>IGOPPOffres d’achat hostiles &#8211; IGOPP</title>
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		<title>Audet family was right to reject Rogers&#8217; attempted takeover of Cogeco</title>
		<link>https://igopp.org/en/audet-family-was-right-to-reject-rogers-attempted-takeover-of-cogeco/</link>
		<comments>https://igopp.org/en/audet-family-was-right-to-reject-rogers-attempted-takeover-of-cogeco/#respond</comments>
		<pubDate>Fri, 11 Sep 2020 14:35:55 +0000</pubDate>
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		<category><![CDATA[Activime]]></category>
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		<category><![CDATA[Dual-class shares]]></category>
		<category><![CDATA[Hostile takeovers]]></category>
		<category><![CDATA[Offres d’achat hostiles]]></category>
		<category><![CDATA[Offres d’achat hostiles]]></category>

		<guid isPermaLink="false">https://igopp.org/audet-family-was-right-to-reject-rogers-attempted-takeover-of-cogeco/</guid>
		<description><![CDATA[In a surprising move, Rogers and Altice USA made an offer to buy Cogeco and Cogeco Communications and split their assets between them. If Cogeco were a typical Canadian corporation with a one-share, one-vote capital structure, the would-be buyers could disregard any reticence or opposition by the board of directors and transmit their offer directly [&#8230;]]]></description>
		<content><![CDATA[In a surprising move, Rogers and Altice USA made an offer to buy Cogeco and Cogeco Communications and split their assets between them. If Cogeco were a typical Canadian corporation with a one-share, one-vote capital structure, the would-be buyers could disregard any reticence or opposition by the board of directors and transmit their offer directly to shareholders. Given that Rogers already holds a stake of 41 per cent in the subordinate shares of Cogeco and 33 per cent for Cogeco Communications, the outcome is fairly predictable. If shareholders representing two-thirds or more of the shares vote for their offer, the deal is done (leaving aside any possible wobbling by the CRTC or the Competition Bureau).

But because of multiple voting shares, the Audet family, which has effective control of these entities, can and did bluntly reject the attempted takeover. And for good reason. Under the family’s leadership, Cogeco shareholders enjoyed a compound return of 9.8 per cent over the last five years and 11.8 per cent over the last ten. Shareholders of Cogeco Communications were rewarded with a compound return of 10.8 per cent over five years and 13.2 per cent over ten years.

Rogers/Altice offered a “generous” premium of some 30 per cent over the average share price of August 2020. But, compared to the share price of Cogeco entities at the beginning of 2020, the bid price represented a measly 2.3 per cent premium for Cogeco and just 18.6 per cent for Cogeco Communications.

On their face, those facts would justify a rejection of the Rogers/Altice offer and perhaps lead to further negotiations. That would prove a point often made in favor of multiple-voting shares: the controlling shareholders are in a great position to extract the best price from would-be buyers for the benefit of all shareholders.

That is not the denouement here, however, as the Audet family has made it clear their rejection of the “hostile” bid is not tactical but is firm and unconditional. Rogers should not be surprised by such a decision nor continue to pursue this acquisition: its own shareholder structure gives total control to the Rogers family (and now to a “control trust,”).

In an era of exotic funds and of “activist” hedge funds seeking to bully companies into taking actions of only short-term benefit, a dual class of shares becomes very attractive and beneficial for the whole industrial system of a country. It is the ultimate defense mechanism, particularly in Canada, where staggered boards do not exist and poison pills are of very short duration. Even in the U.S., however, from 2017 to 2019 some 16.5 per cent of companies going public did so with a dual class of shares, a share structure that is especially popular among tech companies.

Some will argue, as they always do, that all shareholders should have a voice in a takeover decision, as they would with a one-share, one-vote model, and that multiple voting shares represent a breach of shareholder “democracy.” That’s balderdash. The equivalent of “one person-one vote” democracy in the domain of shareholding would be “one shareholder-one vote,” irrespective of the number of shares held. In political democracies, citizens do not acquire more voting rights because they pay more taxes to the government.

Short-term “tourist” shareholders should no more get to vote than tourists who happen to be in a country on voting day should be able to claim voting rights. Like immigrants, newcomers to the shareholding of a company should have to wait a significant time before acquiring “citizenship” and the right to vote. Clearly, one share-one vote can’t be taken seriously.

We live in an age when all institutional investors call on corporations to pursue ESG (Environment, Social, Governance) objectives and in a country where the legal framework as interpreted by the Supreme Court calls on boards of directors to take into account the interests of all stakeholders, without giving preference to any particular group, not even shareholders. Many dual-class companies become family businesses, which have a longer life, are better integrated in their communities and are more likely to plan and manage with a long-term perspective and careful consideration of all stakeholders. The controlling shareholders of the Cogeco companies are exemplars of these benefits associated with family control. May these family-controlled companies, including Rogers, remain impervious to unwanted takeovers and other financial shenanigans.
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		<title>The case for dual class of shares</title>
		<link>https://igopp.org/en/the-case-for-dual-class-of-shares/</link>
		<comments>https://igopp.org/en/the-case-for-dual-class-of-shares/#respond</comments>
		<pubDate>Fri, 13 May 2016 19:37:44 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[News Articles]]></category>
		<category><![CDATA[Actionnaires]]></category>
		<category><![CDATA[Actions multivotantes]]></category>
		<category><![CDATA[Dual-class shares]]></category>
		<category><![CDATA[Hostile takeovers]]></category>
		<category><![CDATA[Offres d’achat hostiles]]></category>
		<category><![CDATA[Offres d’achat hostiles]]></category>
		<category><![CDATA[Shareholders]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=6274</guid>
		<description><![CDATA[With the Bombardier saga and the Couche-Tard warning bell, the usual litany of arguments against dual class of shares was again dusted off. Commentators opposed to this capital structure seem to forget or overlook the inconvenient truth that many of Canada’s industrial champions are controlled corporations often through a dual class of shares. That is [&#8230;]]]></description>
		<content><![CDATA[With the Bombardier saga and the Couche-Tard warning bell, the usual litany of arguments against dual class of shares was again dusted off. Commentators opposed to this capital structure seem to forget or overlook the inconvenient truth that many of Canada’s industrial champions are controlled corporations often through a dual class of shares.

That is the conclusion one may draw from the Ontario Institute for Competitiveness and Prosperity study which identified 77 Canadian industrial champions; only 23 of them were widely-held corporations; 33 were listed controlled corporations, 19 of them via a dual class of shares; another 16 were privately held! (Flourishing in the global competitiveness game, working paper 11, September 2008). Furthermore, 23 of the 50 largest employers in Canada were dual class companies (Canada’s 50 biggest employers in 2012, Globe and Mail, June 28th 2012)

That is a fundamental point:

Without a controlling shareholder, without a dual class of shares, there would be no aeronautical industry in Canada, no C-Series to compete with Boeing and Airbus, a singular Canadian feat, no Magna in Ontario (a dual class company until 2010), no Rogers Communication, no Teck Resources, no Canadian Tire, no Weston, no CGI, no Shaw and so on. 

And why is that?

In a period such as the 2002-2003 when the U.S. dollar was worth close to C$1.60 and the stock market was seriously depressed, all these Canadian companies would have been bargains for U.S. acquirers. Canada would have reverted to the branch-plant economy of the 1950s.

In any case, at one point or another, their success would have attracted foreign buyers. May we mention Tim Horton, Alcan, Falconbridge, etc. That is the reason why so many sensitive industrial sectors are legally protected in Canada from foreign takeovers (banks, telecoms, airlines, media companies)

And wisely so! For the Canadian regulatory context is one of the most hospitable to unwanted takeovers, much more so than in the United States. And don’t count on the toothless Investment Canada to block foreign acquisitions.

American companies have multiple measures (although waning in effectiveness) at their disposal to rebuff an unwanted takeover of their company (staggered boards, poison pills of unlimited duration, board’s authority to just say no, etc.) So, because of these American conditions, Boeing may carry on with its long-term investments without fear of an unwanted takeover in difficult times, and they have had quite a few.

Then, financial markets have become populated by short-term so-called investors and analysts fixated on the next quarter’s earnings per share and stock performance; they have become the locus of nasty financial games played with and around publicly listed companies.

Thus, the new breed of American (and Canadian) entrepreneurs not only do they want to be shielded from unwanted takeovers they also seek to insulate themselves from the quarterly pressures of analysts and short-term investors.

In 2015, according to Prosoaker Research (2016), 24% of all new share offerings (IPOs) in the U.S. were made with a dual class structure, a sharp increase from 15% in 2014 and 18% en 2013. So, young companies such as Alphabet (i.e. Google), Facebook, Groupon, Expedia, (and, in Canada, Cara, BRP, Shopify, Spin Master, Stingray) have issued two classes of shares, one with multiple votes which assures them of an unassailable control over their companies and makes them relatively indifferent to the short-term gyrations of earnings and stock price.

Furthermore, in Canada since 1987 (but not in the USA), companies issuing a class of shares with multiple votes must adopt, as a requirement to be listed on the Toronto stock exchange, a coat-tail provision. That provision essentially ensures that all shareholders will receive the same price for their shares, should the controlling shareholders decide to sell out. That twist, by itself, has removed most of the potential financial benefits of control through a dual class of shares.

Add to the mix of dual class companies the much stricter contemporary rules of corporate governance and the presence of a majority of independent directors on their boards and you have a recipe for success, for long-term strategic thinking, and for bold job-creating investments. It turns out to be a demonstrably optimal arrangement for all investors: controlling shareholders with their wealth at stakes managing, or supervising management, and taking a long-term view of the company.

Financial performance

If getting good steady returns is what investors are looking for, dual class companies are indeed a good bet. The evidence is now pretty compelling that these companies perform better than conventional companies; or at least, perform as well and provide the added benefit of keeping their ownership and headquarters in the home country.

The following table provides some of that evidence from recent studies (but with different time periods):

Performance of Canadian dual class firms, compared to single class firms (or reference index) over 5, 10 and 15 years periods

 [1]

Conclusion

Setting aside cases of extraordinarily attractive companies, such as Amazon where Bezos still owns 18% of the shares, it is difficult for companies to undertake gutsy investments and implement strategies unfolding over many years without some buffer from the short-term pressures of contemporary financial markets. That may not be to the liking of some financial players but so be it.

That pressing reality must be acknowledged by all, including policy makers, who do not have a vested interest in making lots of money quickly. Don’t be fooled by specious arguments merely disguising self-interest. Investors who would have bought a basket of shares in Canadian dual-class companies would have done well over the last ten years better than by holding shares in a portfolio of single-class companies.

Do not be swayed by the spurious argument of shareholder democracy. If shareholders were the equivalent of citizens in a democracy, then tourists (i.e. transient shareholders) would not vote and all new shareholders (i.e. immigrants) would have to wait for a considerable period of time before acquiring the right to vote.

Dual-class companies account for a good number of Canada’s industrial champions; indeed dual class shares are a pillar of our industrial structure. That ownership structure should be encouraged, promoted and blessed, provided proper safeguards are in place to protect minority shareholders.

Opinions expressed herein are strictly those of the author.

[1] https://igopp.org/wp-content/uploads/2016/05/Table-dual-class.jpg]]></content>
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