Lawyers clash at hastily called OSC hearing to discuss shareholder Catalyst’s complaint over Corus-Shaw deal

Lawyers clashed Friday afternoon in a hastily called regulatory hearing as dissident investor Catalyst Capital Group Inc. launched an 11th hour bid to delay next week’s shareholder vote on Corus Entertainment’s proposed $2.65-billion takeover of Shaw Media.

Catalyst alleges Corus made “material misstatements” within the information that was presented to shareholders concerning the financial underpinnings and benefits of the proposed transaction. It wants the OSC to buy that Wednesday’s vote be postponed until later this month.

Robert Staley of Bennett Jones LLP, counsel for Catalyst, told the hearing the application is designed only to correct the disclosure issues, not to interfere with the transaction.

“It’s not Catalyst’s intention to prevent shareholders from getting a vote around the transaction,” he explained as the hearing got underway.

Lawyers for Corus and Shaw weren’t buying any of that. They try to shut the hearing down as quickly as possible therefore the Wednesday vote can proceed.

“One lone shareholder shouting in the wilderness does not a public interest make,” said Larry Lowenstein, someone with Osler, Hoskin & Harcourt LLP, who appeared with respect to Corus.

“Not really a single other shareholder has expressed concerns to Corus,” he said. “The information is on the market inside a fair process. It’s time for shareholders to vote.”

Friday’s fireworks were only the start. The hearing came together so quickly on Friday that the OSC panel hearing the situation hasn’t even had a chance to see whether Catalyst has got the technical legal right to launch the situation.

Indeed, Lowenstein’s point about Catalyst being that “lone shareholder shouting in the wilderness” is among the issues the panel needs to consider when it reconvenes Monday.

Pamela Foy, a staff counsel using the OSC, argued prior to the panel there was reason to wonder if Catalyst had the right to bring the general public interest complaint.

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Commission rules allow a private party to produce a complaint in the public interest, but panels can block such claims if they’re convinced the complainant is launching the situation for some personal, tactical advantage.  

The hearing resumes Monday afternoon, after which the panel will hear arguments whether Catalyst actually has the legal standing it needs to bring the application.

If the panel disagrees, the problem dies. If the panel agrees, lawyers for Catalyst will argue the case until 6 p.m., and also the panel will deliberate around the matter later Monday evening.

At least one academic has implored the OSC to intervene and delay the deal until more information was publicly disclosed to investors about how exactly it came together and also the potential conflicts of the parties involved.

These included how the Shaw family, which controls most of the voting shares of both Corus and Shaw Media’s parent company, Shaw Communications Inc., stands to profit by shuffling the assets within its cable empire.

In a six-page letter submitted Monday towards the OSC, Anita Anand, legislation professor in the University of Toronto, asserted Corus didn’t explicitly state the direct or indirect benefits that could accrue towards the Shaw family in the Feb. 9 circular to shareholders.

Anand referred to this as “a stark omission,” stating that it “arguably constitutes a misrepresentation” that may be “in violation of the disclosure requirements” in position for deals of the kind.

“Securities law is based on making certain investors have adequate information” so they make a fully informed decision, Anand added the 2009 week during a phone interview. “I do not think shareholders have obtained what they’re owed under securities law. To me, delaying the deal isn’t a big ask.”

“It is hardly surprising that the minority shareholder would scrutinize a related-party transaction like this – because they should,” said Richard Leblanc, an expert in corporate governance and a professor at York University in Toronto. He added that companies involved with deals this intimate should “be seen as exceeding beyond and beyond the normal disclosure obligations – if you’ve got nothing to hide.”

During the two weeks since Catalyst’s opposition to the deal first went public, Corus has staunchly defended the company’s disclosure practices.

Corus spokesperson Sally Tindal did not immediately respond Friday afternoon to a request comment.