Canadian investors are beginning to realise they can exert greater control over companies to create share value
Companies in Canada are seeing a steady rise in the influence of shareholders that want to hold management to account, continuing the global trend of activist stakeholders. While most challenges have come from outside of Canada, local shareholders are also starting to exert more influence on how businesses operate.
New York-based investment group Pershing Square Capital Management, founded and run by billionaire Bill Ackman, last year demanded management and board changes at Canadian Pacific Railway. Since then, the value of the company has jumped 54 percent, after rises of just 14 percent and 6.7 percent in 2010 and 2011 respectively.
This high-profile example has reportedly spurred on shareholders of other companies in Canadian firms to demand changes and greater control over how businesses are run, according to Walied Soliman, partner at accounting firm Norton Rose.
Soliman told the Financial Post newspaper recently: “Post-Ackman, there has been a feeling among activists in Canada that it is open-season on Canadian companies and activists have been emboldened. We’re seeing an increasing amount of Canadian-based activism. I think we are going to see more of it.”
According to the Vancouver Sun, local investment groups like West Face Capital and Smoothwater Capital Corp have been looking to shake up a range of Canadian businesses to create better value. Smoothwater’s partners, Garfield Mitchell and Stephen Griggs, told the paper that they were looking to invest between $20m to $50m in public companies so that they could exert more influence.
Smoothwater’s first such acquisition is a 22 percent stake in Calgary-based real estate business Genesis Land Developments, which they hope to steer toward greater share value. They said: “Smoothwater has identified a number of initiatives that Genesis can take to significantly improve its share value over time and is communicating with the board of directors and like minded investors with the goal of having the company pursue some or all of these options.”
In May, Soliman told reporters that the rise in activism in Canada was unsurprising, particularly as shareholders were able to call meetings before the usual AGM’s to discuss strategy and scrutinise the board; something not seen in many other markets. He said that experienced investors were finally beginning to realise the opportunities they had, and that there were now as many as 50 proxy battles each year.
He added: “I think Canada is the most shareholder-activist friendly jurisdiction in the world, and I think shareholders are realising it now.”
The world’s 11th largest economy, Canada has not seen as many proxy battles as the US, reportedly due to a lack of institutional investors holding large stock and therefore unable to exert as much influence over boards.