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		<title>‘It’s never only about the money’: Past deals hint at tactics for Cogeco’s suitors</title>
		<link>https://igopp.org/en/its-never-only-about-the-money-past-deals-hint-at-tactics-for-cogecos-suitors/</link>
		<comments>https://igopp.org/en/its-never-only-about-the-money-past-deals-hint-at-tactics-for-cogecos-suitors/#respond</comments>
		<pubDate>Fri, 11 Sep 2020 18:01:27 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
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		<guid isPermaLink="false">https://igopp.org/its-never-only-about-the-money-past-deals-hint-at-tactics-for-cogecos-suitors/</guid>
		<description><![CDATA[The move by Rogers Communications Inc. and Altice USA to launch a hostile takeover bid for Cogeco Communications Inc. and parent Cogeco Inc. without the support of the Quebec companies&#8217; controlling shareholder looks like a long-shot gamble to many experts. But they say similar past deals for family-controlled companies show there can be a path to victory [&#8230;]]]></description>
		<content><![CDATA[The move by Rogers Communications Inc. and Altice USA to launch a hostile takeover bid for Cogeco Communications Inc. and parent Cogeco Inc. without the support of the Quebec companies' controlling shareholder looks like a long-shot gamble to many experts. But they say similar past deals for family-controlled companies show there can be a path to victory for the would-be buyers.
The Audet family, who control both companies through their ownership of multiple-voting shares, quickly rejected the $10.3-billion offer, which would see Rogers take over Cogeco’s Canadian cable business and Altice acquire its U.S. operations. Executive chairman Louis Audet was adamant on Monday: The family’s shares are not for sale and that’s not a negotiating ploy.
The Audets' control over the dual-class share structure does give them final say, but merger and acquisition lawyers and principals who have sold family-controlled companies in the past say this is just the beginning. The buyers are now likely to deploy a range of strategies that could include discreet overtures to family members and appealing to Mr. Audet’s ego through the promise of future influence in the company or through tributes to his family’s legacy.
Going public with the offer was a “shot over the bow,” one expert says – it let the world know a deal is available, spiked Cogeco’s share price and gave minority shareholders something to think about.
“Often the only way to ensure that you have the support of other shareholders, or to raise the temperature on shareholders who may be blocking a transaction, is to raise the public profile,” says Walied Soliman, the Canadian chair of law firm Norton Rose Fulbright, who recently advised NordStar Capital LP on its winning bid for media company Torstar Corp.
“Even holders of dual-class shares have to be concerned about their reputations and bare-knuckle economics,” he says, pointing to the optics of shutting other shareholders out of a return on investment that might not come around again soon. “I think the approach [for a buyer] is to be patient, advance a thesis, get other shareholders on board and eventually it becomes very uncomfortable and difficult for a blocking shareholder not to proceed.”
Meanwhile, “soft issues” can be just as crucial as cash, Mr. Soliman says, noting that adherence to Torstar’s traditional progressive editorial values was of central importance to the five controlling families who sold to NordStar.
“It’s never only about money,” says Stephen Greenberg, a Montreal media executive whose family sold broadcaster Astral to Bell Canada in a $3.4-billion deal approved by regulators in 2013. “The Audets are looking at legacy. They’re looking at longevity. They’re looking at this as something that was started by their father and has grown exponentially over the years. Everything is wrapped up in these decisions: It’s personal, it’s business, it’s inter-family discussions. … It’s never one-dimensional.”
[...]
Poonam Puri, a law professor at York University’s Osgoode Hall Law School, says dual-class share structures present unique governance challenges for boards of directors: “The founding family typically controls the majority of the voting rights, but owns only a sliver of the total equity.”
The board must consider a formal bid “in good faith,” Ms. Puri says, which usually entails striking a special committee of independent directors to consider the offer. Ultimately though, the board may find its options are constrained. “The Audet family has the legal right to vote their shares according to their own interests, and as controlling shareholder, they have an effective veto over any proposed acquisition.”
Before Mr. Audet’s statement, Cogeco said the independent directors of both Cogeco and Cogeco Communications rejected the Rogers-Altice bid after board meetings and discussions with the family.
The courts and the “business judgment rule” have long protected the right of controlling shareholders to call the shots on a change of control. In a landmark 1998 ruling that helped establish the principle of deference to reasonable decisions by controlling shareholders, the Ontario Court of Appeal upheld a decision by the Schneider family to veto the sale of their meat-production company to Maple Leaf Foods in favour of a lower bid from a U.S. suitor (Maple Leaf eventually acquired Schneider Corp. from the U.S. buyer a few years later).
Pivoting toward a friendly deal that satisfies the Audet family is the only obvious way for Altice and Rogers to win Cogeco, says François Dauphin, CEO of the Montreal Institute for Governance of Private and Public Organizations. Winning the support of minority shareholders could also put pressure on the Audet family but they would still need to agree to sell, he said.
Institute staff recently dug through archival material and found a statement by the late Ted Rogers affirming that Rogers Communications would never make an offer for a company that was not for sale, Mr. Dauphin says. “That was 20 years ago. And he’s not there any more to explain to us what’s behind this whole tactic."
Read more [1]

[1] https://igopp.org/wp-content/uploads/2020/09/Nicolas-Van-Praet_Past-deals-hint-at-tactics-for-Cogeco’s-suitors_The-Globe-and-Mail_September-2020.pdf]]></content>
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		<title>BNN interview with the Chair of IGOPP, Dr. Yvan Allaire, on Cogeco unsolicited bid from Altice</title>
		<link>https://igopp.org/en/bnn-interview-with-the-chair-of-igopp-dr-yvan-allaire-on-cogeco-unsolicited-bid-from-altice/</link>
		<comments>https://igopp.org/en/bnn-interview-with-the-chair-of-igopp-dr-yvan-allaire-on-cogeco-unsolicited-bid-from-altice/#respond</comments>
		<pubDate>Thu, 03 Sep 2020 13:03:10 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
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		<guid isPermaLink="false">https://igopp.org/the-audet-family-response-did-not-suggest-they-are-open-to-negotiate-institute-for-governance/</guid>
		<description><![CDATA[Chairman of the Institute for Governance Yvan Allaire says that the blunt response from Louis Audet suggests the family that owns Cogeco might not be open to negotiating a selling price. To access the interview with M. Allaire, please click here.]]></description>
		<content><![CDATA[Chairman of the Institute for Governance Yvan Allaire says that the blunt response from Louis Audet suggests the family that owns Cogeco might not be open to negotiating a selling price.

To access the interview with M. Allaire, please click here. [1]

 [2]

[1] https://www.bnnbloomberg.ca/technology/video/the-audet-family-response-did-not-suggest-they-are-open-to-negotiate-institute-for-governance~2027880
[2] https://www.bnnbloomberg.ca/technology/video/the-audet-family-response-did-not-suggest-they-are-open-to-negotiate-institute-for-governance~2027880]]></content>
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		<item>
		<title>Quebec budget includes $1-billion to keep head offices, like SNC-Lavalin’s, in the province</title>
		<link>https://igopp.org/en/quebec-budget-includes-1-billion-to-keep-head-offices-like-snc-lavalins-in-the-province/</link>
		<comments>https://igopp.org/en/quebec-budget-includes-1-billion-to-keep-head-offices-like-snc-lavalins-in-the-province/#respond</comments>
		<pubDate>Thu, 21 Mar 2019 22:57:26 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/quebec-budget-includes-1-billion-to-keep-head-offices-like-snc-lavalins-in-the-province/</guid>
		<description><![CDATA[[ &#8230; ] The Quebec government has set aside $1-billion to encourage strategically important businesses to keep their head offices in the province, a measure Finance Minister Eric Girard says he could use to protect the Montreal executive suites of SNC-Lavalin Group Inc. Mr. Girard announced the measure Thursday in his Coalition Avenir Québec government’s [&#8230;]]]></description>
		<content><![CDATA[[ ... ]
The Quebec government has set aside $1-billion to encourage strategically important businesses to keep their head offices in the province, a measure Finance Minister Eric Girard says he could use to protect the Montreal executive suites of SNC-Lavalin Group Inc.
Mr. Girard announced the measure Thursday in his Coalition Avenir Québec government’s first budget, which hikes spending 4.7 per cent and relies heavily on increased federal transfers to keep a clean balance sheet.
The budget is light on details of how the government would execute the head-office plan. Budget documents say the government will strike a team “whose mandate will be to develop business intelligence in the field of head office protection.” Mr. Girard said details will be announced later by Economy Minister Pierre Fitzgibbon.
The retention of head offices has been a sensitive issue in Quebec since the 1970s, when companies fled the province amid a separatist movement and lagging economic prospects. Quebec independence is on the back burner, but the head-office issue reared up again after U.S. hardware giant Lowe’s Companies Inc. made a surprise bid for Quebec-based Rona Inc. and troubles mounted for SNC-Lavalin, the engineering giant facing corporate fraud and bribery charges after years of international scandal.
If convicted, Ottawa could ban the company from bidding on federal projects for 10 years. A ban in Canada would force the company to seek more work outside the country and throw into question its commitment to maintaining its headquarters in Montreal.

[ ... ]

Montreal’s Institute for Governance published a list in 2016 of 16 Quebec-based companies with more than $1-billion in revenue having no protection against hostile takeovers. Some of the companies on that list are almost certainly on Quebec’s current list of strategic firms, including grocer Metro Inc., aerospace training firm CAE Inc. and engineering company WSP Global Inc., said Yvan Allaire, executive chairman of the institute. Other companies that are integral to the economy likely include Alimentation Couche-Tard Inc., Bombardier Inc. and CGI Inc., which all have dual class shares as defences.

 Read more [1]

[1] https://igopp.org/wp-content/uploads/2019/03/Quebec-budget-includes-1-billion-to-keep-head-offices-like-SNC-Lavalin’s-in-the-province-The-Globe-and-Mail_March-2019.pdf]]></content>
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		<title>&#8216;It’s sad&#8217; no one asked questions while SNC profits soared: Ex-Caisse exec</title>
		<link>https://igopp.org/en/its-sad-no-one-asked-questions-while-snc-profits-soared/</link>
		<comments>https://igopp.org/en/its-sad-no-one-asked-questions-while-snc-profits-soared/#respond</comments>
		<pubDate>Thu, 14 Feb 2019 16:19:39 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
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		<guid isPermaLink="false">https://igopp.org/its-sad-no-one-asked-questions-while-snc-profits-soared/</guid>
		<description><![CDATA[The long series of scandals ensnaring SNC-Lavalin Group Inc.  has one former executive of the Caisse de dépôt et placement du Québec calling for more accountability when it comes to corporate bribes for global contracts. Michel Nadeau, a former deputy chief executive of Caisse – the largest shareholder in SNC – told BNN Bloomberg on [&#8230;]]]></description>
		<content><![CDATA[The long series of scandals ensnaring SNC-Lavalin Group Inc.  has one former executive of the Caisse de dépôt et placement du Québec calling for more accountability when it comes to corporate bribes for global contracts.

Michel Nadeau, a former deputy chief executive of Caisse – the largest shareholder in SNC – told BNN Bloomberg on Wednesday that when he left his role in 2003, the Quebec pension fund was not aware of any corruption or fraud activity related to SNC’s construction projects in Libya at the time.

Nadeau noted that under former SNC chief executive Pierre Duhaime, who pleaded guilty Feb. 1 for his role in a bribery scandal [1] around the construction of a Montreal hospital, the company’s average profit rose substantially.

“When you double your profits, shareholders, directors – they will never ask, ‘Why are you doubling the profits? What is the secret?’” said Nadeau, now executive manager with the Institute for Governance of Private and Public Organizations in Montreal.

“It’s because you have contracts which are much more profitable than your usual activity. Nobody is raising questions on how you’re making much more profits. And it’s sad, but we should be aware.”

SNC’s average profit from 2006 to 2008, three years prior to Duhaime becoming president and CEO in 2009, was $208 million. Between 2009 to 2011, with Duhaime at the helm, the company’s average annual profit nearly doubled to $404.95 million.

In February 2015, SNC and two of its subsidiaries were charged with paying nearly $48 million to public officials in Libya between 2001 and 2011 to influence government decisions. The RCMP has also charged the company, its construction division and a subsidiary with one charge each of fraud and corruption for allegedly defrauding various Libyan organizations of roughly $130 million. If found guilty, SNC could be barred from bidding on federal contracts for a decade.

Nadeau added that SNC’s past practices followed many other large engineering firms that pay bribes, which has led some Canadian companies like WSP Global Inc. to focus its business in developed countries.

“Unfortunately, it is a reality,” he said.  “I think if you look at large French, German, American corporations, you have to do this if you want to have access to contracts.”

“So that’s why if you want to go into emerging countries, unfortunately in some of them – not all of them – you have to give bribes.”

To access this interview, please click here. [2]

[1] https://www.bnnbloomberg.ca/former-snc-lavalin-ceo-pierre-duhaime-pleads-guilty-in-bribery-case-1.1207899
[2] https://www.bnnbloomberg.ca/it-s-sad-no-one-asked-questions-while-snc-profits-soared-ex-caisse-exec-1.1214272]]></content>
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		<item>
		<title>Why Tim Hortons is not buying Burger King?</title>
		<link>https://igopp.org/en/pourquoi-tim-hortons-nachete-pas-burger-king/</link>
		<comments>https://igopp.org/en/pourquoi-tim-hortons-nachete-pas-burger-king/#respond</comments>
		<pubDate>Tue, 02 Sep 2014 23:36:35 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[News Articles]]></category>
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		<description><![CDATA[Although smaller than Burger King, Tim Hortons (TI) is more profitable and better managed than Burger King. Their stock market valuation is comparable. Why then is it not Tim Hortons that is trying to buy Burger King? TI becomes a target of hedge funds One must recall that in early 2013, two activist funds (Scout [&#8230;]]]></description>
		<content><![CDATA[Although smaller than Burger King, Tim Hortons (TI) is more profitable and better managed than Burger King. Their stock market valuation is comparable. Why then is it not Tim Hortons that is trying to buy Burger King?

TI becomes a target of hedge funds
One must recall that in early 2013, two activist funds (Scout Capital Management and Highfields Capital, two hedge funds) started circling around TI. The two funds, which, at the time, held respectively 7% and 4% of TI’s shares, wanted to be heard by management and the board of directors.The managers of the two funds said and wrote that although TI was extremely well managed and enjoyed tremendous commercial success, its stock was lagging in performance. TI could create a lot more shareholder value if it implemented their recommendations. Essentially, the two hedge funds contended that TI’s board of directors lacked financial savvy, was not conversant enough with the tricks of financial engineering. So, they urged the board of TI to:


 	increase the company’s indebtedness in order to buy back a large number of its shares;
 	stop (or slow down) the company’s expansion in the United States;
 	spin-off its real estate holdings in an exchange listed “real estate investment trust” (REIT);
 	tie executive compensation to earnings per share and total shareholder return (TSR);
 	bring in new board members drawn from the financial community.

These measures, the hedge funds asserted, would increase earnings per share and the return on equity of TI and would, ipso facto, boost its share price. In what has to be an iconic statement about what differentiates financial capitalism from industrial capitalism, a hedge fund wrote:

“In fact, we would argue that the earnings growth created through this [financial engineering] approach would be far superior (at much lower execution risk) than attempting to drive growth through continuing to invest in the U.S. market at sub‑par returns.” [Letter sent by HIGHFIELDS CAPITAL MANAGEMENT to Tim Hortons on March 21, 2013.]

At first, TI’s senior management and board of directors were underwhelmed with these recommendations and politely dismissed the two activist funds. But, these funds did not give up and, it seems, finally succeeded in convincing the board that their recommendations were sound (except for the REIT gambit).

So, TI added two board members from the financial community; then, on August 8, 2013, the company announced that the board of directors had approved  $900 million in new debt to buy back a billion dollars-worth of shares of TI over the next twelve months.

The results of these financial moves are captured in the following table:

In eighteen months, TI was transformed from a company with little leverage (debt-to-debt plus equity of 26.4%) into a highly leveraged company (77.3%). Shareholders’ equity has melted away, shrinking from $1.2 billion to $384 million (given that any buyback of shares at a market price higher than the book value of the shares triggers a reduction in equity equivalent to the difference between the two amounts).

TI’s stock price increased from $55 in July 2013 to $62 at the end of 2013, a 13% gain, just in time for some funds to sell their holdings at a profit; but the market quickly realized that, with its new capital structure and financial strategy, TI would have to slow down its growth in the United States, which caused the share price to drop back to $58 in July 2014.

Therefore, in the short term, the stock market reacted as predicted by the hedge funds, but in the longer term, because this financially engineered growth in earnings could not be sustained, the stock returned to its intrinsic value.

The TI of December 2012, with its very low leverage, could have considered making a bid for Burger King. However, the TI of July 2014 no longer had the financial flexibility and buffer to consider a Burger King transaction. So-called “activist” hedge funds, all too often, propose stratagems that work well for their funds’ performance but hamper the development of industrial firms and inflict considerable damage unto targeted companies.

Should TI really consider buying Burger King?
If TI still had the financial wherewithal, should it have bid to buy Burger King? After all, TI needs no “financial inversion” to benefit from the favourable Canadian corporate income tax regime, which is touted as a rationale for the transaction. (Some observers believe that another reason for transferring Burger King’s legal head office to Canada is to sooth Investment Canada, which will have to approve the transaction and assess whether it brings “tangible benefits for Canada.”)

Well, let’s remember that between 1995 and 2005, TI was part of the Wendy’s International Group (Wendy’s being a direct competitor of McDonald’s and Burger King). In 2005, some activist funds, including the omnipresent Bill Ackman (Pershing Square – which holds almost 11% of the Burger King shares), made the case forcefully that Wendy’s should spin-off Tim Hortons by listing it on the stock market.

In a letter addressed to Wendy’s senior management, Ackman, who, at the time, held 9.9% of its shares, wrote:

“We believe that many Wendy’s shareholders and members of the Wall Street research analyst community have frequently questioned the benefits of having Tim Hortons under the same corporate structure as Wendy’s given the minimal synergies that exist between the two companies. (…) As such, we believe that as long as Tim Hortons is owned under the Wendy’s corporate umbrella, the Company will trade at a depressed valuation.” [Letter by W. Ackman to the Chairman, CEO and President of Wendy’s International, dated July 11, 2005.]

In other words, it is a bad idea to merge two such disparate entities as Wendy’s (or Burger King) and Tim Hortons into one and the same company.

It would not be surprising if, a few years hence, some activist hedge funds make the case that Tim Hortons should again be spun off from Burger King. Maybe once the benefits of tax inversion become less significant…

(The opinions expressed in this article are those of the author.)


]]></content>
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		<title>Doing Business With Quebec Inc.</title>
		<link>https://igopp.org/en/doing-business-with-quebec-inc-3/</link>
		<comments>https://igopp.org/en/doing-business-with-quebec-inc-3/#respond</comments>
		<pubDate>Tue, 07 Aug 2012 20:02:39 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
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