Teachers' won't swallow Maple Leaf's 'poison pill' to thwart hostile takeover

One of the largest shareholders in Maple Leaf Foods Inc. is refusing to swallow the company's plan to bring in a so-called "poison pill" defence to thwart any potential hostile takeover. Ontario Teachers' Pension Plan, which is reportedly looking to sell its 35 per cent stake in the company, says it will vote against the plan adopted by Maple Leaf's board of directors late Tuesday.

The Toronto Star
July 1, 2010

Teachers' won't swallow Maple Leaf's 'poison pill' to thwart hostile takeover
Sunny Freeeman and B.H. McKenna, The Canadian Press

Maple%20LeafF.jpg

Maple Leaf Foods CEO Michael McCain arrives for a press briefing in Quebec in 2008 after a Listeria outbreak involving Maple Leaf products. He says the firm has faced a “stream of challenges” over the past four years. Ryan Remiorz/The Canadian Press

TORONTO - One of the largest shareholders in Maple Leaf Foods Inc. is refusing to swallow the company's plan to bring in a so-called "poison pill" defence to thwart any potential hostile takeover.

Ontario Teachers' Pension Plan, which is reportedly looking to sell its 35 per cent stake in the company, says it will vote against the plan adopted by Maple Leaf's board of directors late Tuesday.

"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," Neil Petroff, Teachers' executive vice-president of investments said in a statement Wednesday.

"We are also considering all of our options with respect to our Maple Leaf shareholdings," he added.

Toronto-based Maple Leaf said the plan would be triggered if an unwanted suitor sought to acquire 20 per cent or more of the company.

The plan would flood the market with new Maple Leaf shares and make a hostile takeover prohibitively more expensive for a would-be buyer.

Maple Leaf chief financial officer Michael Vels said the plan coincides with the expiry of an agreement between the company's two largest shareholders, McCain Capital Corp. and the Ontario Teachers' Pension Plan Board.

"It wasn't put in place in the knowledge of or in advance of any transaction or change of shareholding that we're aware of," he said.

Between them, the two blocks held voting control over the company.

However, Teachers' is reportedly looking to sell its 35 per cent stake in the company, valued last month at about $450 million, and ending its long-time partnership with the McCain family.

Teachers' is converting its 11.7 million non-voting shares into the equivalent number of voting shares.

It will also continue to own 10.3 million non-voting shares and warrants into 2.2 voting shares, giving it 30 per cent of voting shares, or 36 per cent on a partially-diluted basis.

The large pension fund has also entered into a voting agreement with another investor, Sixmoront Corp., which will be its voting partner.

The pension fund manager adds that it has also entered into an understanding with the food processing company about how Teachers would go about selling its stake on the market.

Vels said the agreement states that the company would be co-operative in the event that it, or one of the significant shareholders made a request for the company to help them in any divestiture of shareholdings.

It’s possible another another larger food company in Canada or outside the country could seek to buy the Teachers; stake if it is put up for sale.

Bob Gibson, a retail analyst at Octagon Capital Corp., says international food conglomerates are most likely to make a play for Teachers' stake in Maple Leaf.

The rights plan, which is effective immediately, is designed to allow the board of Maple Leaf and its shareholders sufficient time to consider fully any transaction involving the acquisition or proposed acquisition of 20 per cent or more of the company’s outstanding voting common shares.

Under the plan, one right was issued with respect to each voting common share and each non-voting common share of Maple Leaf as of the close of business on June 29, 2010.

If triggered, the plan would entitle a rights holder, other than the acquiring person and related persons, to purchase voting common shares or non-voting common shares at a 50 per cent discount to the market price at the time.

Maple Leaf said the TSX had advised the company that it has accepted the rights plan for filing subject to the condition that shareholder approval is obtained within six months of its adoption. If approved, the plan will have a three-year term.

Maple Leaf has endured what CEO Michael McCain has called a "constant stream of challenges" over the past four years, which started when the Canadian dollar reached parity with the U.S. greenback and worsened with a Listeria outbreak involving the company's products.

The company said it was seeing "renewed interest from potential purchasers" for the Burlington, Ont.-based operation, one of the largest pork processing facilities in Canada.

The sale would mark the last major hurdle in Maple Leaf's restructuring of its protein business, which it began in 2007 with the goal of consolidating its pork processing operations in one facility in Brandon, Man., so it could focus on its branded meat, bakery and meals products.

In May, Maple Leaf announced that it was putting its Ontario pork processing business up for sale again after a failed attempt to unload the facility at the height of the credit crunch.

Print only. Web publication: http://www.thestar.com/business/article/830644--teachers-opposes-maple-leaf-poison-pill
——
Brought to you by WikidFranchise.org

Risks: 80 per cent of food distributed by 2 vertically-integrated groups of companies in Ontario, Canada, Big Grocery, Big Grocery's food safety record, Cannon fodder, Competence, Death, Follow the money: franchising re-distributes (not creates) wealth, Food poisoning causing injury or death, Food safety, Franchisee, independent contractor or employee?, Hubris, Incompetent or predatory: for the small business investor, the outcome is the same, Listeriosis, Mergers and acquisitions, Monopoly or near-monopolies creates sub-optimal capital allocations, Nepotism: favoritism granted to relatives or friends regardless of merit, Oligopoly, Overconfidence effect, Stock market pressures make franchisor push system sales higher and higher, Stock price plummets, Canada, 20100701 Teachers wont

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License