OSC shuts down Catalyst application

An Ontario Securities Commission hearing held on Friday and Monday aimed to determine if Catalyst Capital had the standing to pursue an application related to the Corus/Shaw deal.

The Ontario Securities Commission has denied an application from Catalyst Capital that aimed to delay a March 9 shareholder vote on the Corus-Shaw Media deal.

The hearing, held on Friday and Monday afternoons, saw lawyers for Corus Entertainment and Catalyst present arguments on whether Catalyst had the necessary standing to prompt the commission to launch a full hearing looking at financial disclosures related to the deal.

The three-person OSC panel ultimately denied Catalyst standing, effectively shutting down any additional proceedings. When issuing the decision, OSC vice-chair Grant Vingoe said the commission was not making a statement on the adequacy of the disclosure information distributed by Corus.

“We are not persuaded that granting standing to Catalyst would lead to an outcome that would be beneficial to minority shareholders that have not been achieved by other actions undertaken by the application and by market analysis of the transaction itself. There has been a vigorous debate in the marketplace,” Vingoe said.

During the hearing, Corus Entertainment counsel Larry Lowenstein raised concerns about the last-minute nature of Catalyst’s filings. The application from Catalyst was filed on Friday, March 4, with the standing hearing held on Friday and Monday. While he said Catalyst is entitled to take an activist approach, he said the commission should not be used as a “tool” and characterized the equity firm’s ongoing campaign against the deal as “brand-building.”

Catalyst counsel Robert Staley, meanwhile, argued that Catalyst “worked quickly through a series of steps leading to the hearing that is before you today.” He also argued there would be enough time for the OSC to hold a full hearing on the issue before the end of March. He acknowledged his client is an activist, but said the moves made by such players can be beneficial to both shareholders and the market.

“Whether or not you agree with what Catalyst does, there can be no question that there are efficiencies in the capital market brought because people are prepared to speak up and hold management to account,” he said.

The hearing follows several weeks of Corus and Catalyst publicly trading barbs about the deal. Throughout the past several weeks, Catalyst has alleged the Shaw Family stands to gain financially from the deal, as well as alleging Corus has made “materially misleading statements” in information distributed to shareholders in relation to the deal. Catalyst is a minority shareholder in Corus Entertainment.

In a statement issued late Monday afternoon, Corus said it “welcomes the Ontario Securities Commission’s decision to not exercise its discretion, based on its public interest jurisdiction, to hear a complaint put forward by The Catalyst Capital Group regarding Corus’ proposed acquisition of Shaw Media.”

In his own statement, Catalyst Capital managing director Gabriel de Alba indicated the equity firm “respectfully disagree that the dialogue we brought to light in the marketplace is sufficient to protect minority shareholders.”

“Our substantive concerns with the process remain open, as it does not appear that the Shaw Media assets were publicly marketed. Minority shareholders deserve clear information, transparency of process and a robust competitive process in related-party transactions. We will continue to press the Shaw family and Corus for answers to fair questions about the process, and to consider avenues to seek redress for Corus shareholders,” de Alba said in his statement.

The shareholder vote on the Corus-Shaw deal will take place at 10 a.m. Wednesday in Toronto.

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Updated at 10:36 a.m. on March 8