Proposed deal could trigger “the next frontier in governance,” says expert
THE ONTARIO SECURITIES Commission has yet to publicly respond to a shareholder request to halt Cenovus Energy Inc.’s blockbuster $17.7-billion offer for ConocoPhillips Canada’s assets and force it to be put to a shareholder vote. And it may not, but rather just allow the deal to close without intervening, several lawyers say.
Carol Hansell of Hansell LLP, an internationally recognized governance expert, agrees that shareholders did not have the right to vote on the Cenovus deal. “For the acquisition of assets? No. The idea, simply, that you’re doubling your size or whatever, it is fundamentally a management decision.” The Conoco purchase represents a big change to Cenovus’s capital structure, she acknowledges, and changes the balance sheet “pretty radically in terms of the number of shares outstanding and the assets,” but she also views those as core strategy issues that are regulated not by the TSX but by the board of directors and management.
On the question of dilution, Hansell says it’s legitimate to ask how high a company can go in dilutions without asking shareholders “‘are you okay with this?’” But, noting the “fairly dated provisions” of corporate statutes, she adds that “perhaps the law needs to catch up. That’s worthy of discussion.”
Hansell is currently involved in discussion in the US over so-called appraisal rights: situations in which shareholders can demand to be cashed out at fair value because they are unhappy with a transaction. “It’s a live issue, at least in the US, but it’s a step in governance in Canada that we haven’t taken yet –– that shareholders would be able to have a view on this kind of a transaction. That could be a next frontier in governance.”
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