Teachers slams Maple Leaf poison pill

Investors holding Maple Leaf shares for the past 15 years have made compound annual returns of just 3.5 per cent, including reinvested dividends.

The Globe and Mail
June 30, 2010

Teachers slams Maple Leaf poison pill
Canadian food processor trying to prevent the possibility of a hostile takeover
Tara Perkins


The production area at a Maple Leaf Foods plant. Here, a worker prepares large rolls of bologna for automated slicing. The Globe and Mail

Ontario Teachers’ Pension Plan is going to battle with Maple Leaf Foods Inc., (MFI-T8.97——%) saying that it will do all it can to kill a poison pill that the company is putting in place.

The high-stakes argument comes just as a long-standing shareholder agreement between Maple Leaf’s two largest shareholders, Teachers and McCain Capital Corp., expired Wednesday.

Teachers has already approached prospective buyers for its stake in the consumer products giant, according to sources. On Wednesday, the pension plan said the poison pill, or shareholder rights plan, blocks it from exercising its rights.

Maple Leaf Foods said the pill is par for the course.

“The only real point of a rights plan - particularly the one that we have put in place, which is fairly standard - is that it gives the board sufficient time to consider any transaction or any transfer of shares that may arise,” the company’s chief financial officer Michael Vels said in an interview.

“If a transaction was to be suggested that was in the interests of the company and all shareholders, there would be no reason why the board would not agree to that. The intention of the plan is not to impede any shareholder in the orderly disposition of its shares, quite the opposite actually.”

Sources had previously suggested that there was fear within Maple Leaf that hedge funds or other investors who only had a short-term interest in the company would obtain a significant quantity of shares.

Maple Leaf announced late Tuesday that it would adopt the shareholder rights plan, effective immediately.

“The acquisition or proposed acquisition, other than by way of [a] permitted bid or with the consent of the board of directors of the company, by any person of the block of shares held by either [McCain Capital] or Teachers in the company would trigger application of the rights plan,” Maple Leaf said.

Teachers says that it will vote against the pill if it is put to a shareholder vote. “In the meantime we are considering all other options open to us with respect to challenging the adoption of this rights plan, which prevents us from exercising our legal rights as shareholders,” said Neil Petroff, Teachers’ executive vice-president of investments. “We are also considering all of our options with respect to our [Maple Leaf] shareholdings.”

Teachers is converting 11,700,000 non-voting common shares into voting common shares, meaning it will own 29.98 per cent of the outstanding common voting shares. In addition, it owns other non-voting shares and warrants that mean it beneficially owns 36.27 per cent of the voting common shares on a partially diluted basis.

Teachers’ stake in Maple Leaf Foods was its largest single holding of a listed company in Canada as of Dec. 31. The pension fund and the McCains have owned a controlling stake in Maple Leaf since 1995, when Teachers backed the family’s takeover bid for the food company. The shareholder agreement between McCain Capital and Teachers gave McCain the right to three nominees on Maple Leaf’s board and Teachers the right to two.

Investors holding Maple Leaf shares for the past 15 years have made compound annual returns of just 3.5 per cent, including reinvested dividends.

Maple Leaf has developed plans to combat the harmful impact of the rising Canadian dollar, and has been shifting away from products such as fresh pork towards more value-added items such as meals, processed meat products and its bakery business.

It has made progress on that front, but in 2008 an outbreak of deadly listeriosis bacteria was linked to a Maple Leaf plant in Toronto, and the company went into crisis mode.

“We have a very clear strategy to realize substantial shareholder value in the next several years, and we’re just focused on implementing that strategy,” Mr. Vels said. “This from our perspective is just a fairly mundane and regular thing that a board does to make sure that any transfer of share ownership is in the best interests of shareholders.”


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