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Tembec Takeover could Come Down to ‘E...

Tembec Takeover could Come Down to ‘Empty Voting’

July 18, 2017

The planned takeover of Quebec-based Tembec Inc. by Florida-based Rayonier Advanced Materials has become highly contentious, in part because of the strong opposition of Oaktree Capital Management, Tembec’s largest shareholder.

In the view of Carol Hansell who formed her law firm, Hansell LLP in response to “a demand for expert, independent legal counsel in all areas of corporate governance,” shareholders who cast a vote while having no economic interest are “recognized as empty voting.”

“While that is inherent in the system, concerns are raised when empty voting has the ability to influence the outcome of the meeting,” said Hansell, who has authored reports on the plumbing associated with voting at meetings and the pale, male and stale status of most Canadian boards.

Hansell was offering a big picture comment. But there is empty voting situation playing out now — a situation that Hansell, who is not involved, didn’t want to discuss.

The situation — concerning the planned takeover of Quebec-based Tembec Inc. by Florida-based Rayonier Advanced Materials — is set for a July 27 shareholders meeting. To get over the line, two-thirds of the shares voted at the meeting have to be cast in favor.

The takeover — where shareholders can accept $4.05 in cash or 0.2302 of a Rayonier share — has become highly contentious, in part because of the strong opposition of Oaktree Capital Management, Tembec’s largest shareholder with a 19.9 per cent stake, and other shareholders.

This week Oaktree said it intends to solicit proxies from those opposed to the deal. Oaktree opposes the US$807 million “flawed” transaction for what it terms “a flawed and poorly timed process;” for the lack of explanation for the “material gap between Rayonier’s offer and Tembec’s intrinsic value,” and because of its view that a standalone Tembec would be a better alternative.

Oaktree also raises the issue of empty votes, illustrating that comment by referring to the activities of Fairfax Financial, Tembec’s largest shareholder, which had a 19.99 per cent stake when the transaction was announced on May 25. (At that time, Rayonier and Tembec said Fairfax was “supportive of the transaction.”)

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