Radio Shack Canada parent to become income trust

The Barrie, Ont.-based company, whose holdings include 835 Radio Shack Canada stores and dealers, said yesterday that it will begin the process by changing its domicile from Delaware to Canada. That will take about six months, the company said, and it will then be in a position to convert InterTan into an income trust.

The Globe and Mail
November 5, 2003

Radio Shack Canada parent to become income trust
Move ends battle with dissident shareholder
Paul Waldie

InterTan Inc. has ended a protracted battle with a dissident shareholder by announcing plans to turn itself into an income trust within a year.

The Barrie, Ont.-based company, whose holdings include 835 Radio Shack Canada stores and dealers, said yesterday that it will begin the process by changing its domicile from Delaware to Canada. That will take about six months, the company said, and it will then be in a position to convert InterTan into an income trust. InterTan is not related to Texas-based RadioShack Corp., which operates Radio Shack stores in the United States.

The company has been battling Los Angeles-based Liberation Investments LP for three months over the future of the business and its board of directors. Liberation acquired a 5-per-cent stake in InterTan in August and immediately announced a bid to nominate two directors.

The investment fund said InterTan's stock had been underperforming for months and it called for the company to be either sold or converted into an income trust. Liberation also raised concerns about InterTan's staggered board structure, which includes three-year terms for directors and the election of only one group of directors at each annual meeting.

After an exchange of testy letters and a series of meetings, both sides agreed last week to end the feud. Under the agreement, Liberation dropped its proxy contest and InterTan said it would work toward becoming an income trust. The company also agreed to launch a search for two independent directors.

Yesterday, James Maddox, InterTan's chief financial officer, said the company did not cave into Liberation's demands and he described the investment fund's activities as "a bunch of noise."

"The company was working through issues of inversion and income trust scenarios long before Liberation even became a shareholder and will be long after Liberation is not a shareholder," Mr. Maddox said. "They were just advertising for their own personal benefits. They are nothing other than opportunists."

Emanuel Pearlman, Liberation's general manager, said the fund is pleased with the outcome. "We are pleased to see the company take their first steps towards becoming a Canadian income trust. We think that it will be a very good thing for all of the current shareholders, the company and its management." He declined further comment.

Sources say Liberation believes InterTan would make an excellent income trust because it has good cash flow, low capital expenditures and it is in a slow-growth business. "They have their niche and they make money, but they are never going to be a fast-growth company," the source said.

InterTan had $403-million in revenue for the fiscal year ended June 30 and a profit of $8.3-million. Given the company's cash flow, analysts estimate that about $20-million or more could be available for distribution to unitholders. InterTan said yesterday that proposed changes to U.S. tax law will make it easier to convert into a Canadian company.

Jim Barrett, an analyst at CL King & Associates in New York, estimates that InterTan could pay a $1.29-per-unit distribution in fiscal 2005.

"This suggests an initial price for a trust of $10.75," he said in a recent report.

The company's shares closed unchanged at $14 yesterday on the Toronto Stock Exchange.


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