Telus says foreign ownership down with hedge fund likely reducing its position

VANCOUVER – Telus Corp. said Friday that foreign ownership of its common shares has been cut in half, leading the telecom company to believe that a U.S. hedge fund that it’s been locked in battle with has reduced its stake in the company.

Telus said the non-Canadian ownership of the company is roughly 15 per cent as of Nov. 16, down from almost 33 per cent last summer. Large Canadian telecom companies can’t have foreign ownership levels that exceed 33.3 per cent.

Telus (TSX:T) has been embroiled in a fight with New York-based Mason Capital Management over its plan to convert the telecommunication company’s non-voting shares into voting shares on a one-for-one basis.

Mason has argued that Telus’ voting shareholders should get a premium for the conversion to one class of shares, reflecting the higher trading value of the voting shares compared with the class of non-voting shares.

Mason owned almost 20 per cent of Telus’s voting shares and its position had helped push up foreign ownership in Telus to 32.6 per cent last summer.

“Based in part on this change in foreign ownership levels and short trading positions, Telus believes Mason Capital has materially reduced both its long and short positions in the company,” Telus said in a news release.

“Mason last disclosed its ownership levels in August, which was 18.7 per cent of Telus common shares. Notably, given the current total foreign ownership level of only 15 per cent and historical level of approximately 13 per cent, Mason has clearly reduced a significant portion of its holdings,” Telus said.

But Telus also said that it’s possible that Mason Capital may acquire shares on a short-term basis at the end of this month to avoid reporting its trading position.

A spokesman for Mason Capital declined to comment on the matter Friday.

Telus voting shares were up slightly, 31 cents to $64.88, in Friday afternoon trading on the Toronto Stock Exchange on heavy volume of 15 million shares.

Analyst Dvai Ghose of Canaccord Genuity said the decline in foreign ownership of Telus common shares implies that Mason Capital is unwinding its position.

Ghose also said the lower foreign ownership level puts to bed small telecom Globalive’s claim that Telus may have been in breach of foreign ownership restrictions.

“While Mason is not the only foreign holder of Telus common shares, if we assume that the decline in foreign ownership of Telus shares from 32.6 per cent on June 29 to 15 per cent on Nov. 16 was entirely driven by Mason, its stake in Telus common shares could be as low as two per cent,” Ghose said in a research note.

“While we assume that Mason still owns more than two per cent of Telus common shares because we assume that other foreigners may have sold down as well, nonetheless it seems that Mason has unwound a large chunk of its Telus voting share ownership.”

Telus said a decision from the Supreme Court of British Columbia is expected in the coming weeks on its share conversion proposal, which was approved by shareholders earlier this fall.

Telus first introduced its share-conversion plan in February, but withdrew the proposal right before its annual general meeting in May when it said that Mason’s tactics would have prevented the proposal from passing.

Mason Capital bought up almost 20 per cent of Telus last spring after the Vancouver telecom company announced it would hold a shareholder vote on converting its non-voting shares into a common class of voting shares.

The hedge fund also shorted the company’s non-voting shares, which historically traded for less than the voting shares but rose in anticipation of the conversion. Short sellers make a profit when the stock price falls.