WINNIPEG – Just how toxic is the poison pill in United Grain Growers’ shareholders rights plan?
Not very, says UGG.
“In effect this is a sedative, not a poison pill,” a lawyer for UGG told a court hearing in Winnipeg March 13.
It doesn’t prevent a buyer from taking over the company, said John Scurfield. It just makes sure it’s done in a fair, equitable and timely way.
But one of UGG’s biggest minority shareholders presented a rather different toxicological analysis to Court of Queen’s Bench Justice J. A. Scollin.
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“From the point of view of Lindner, it’s a deadly potion,” said Randy McNicol, a lawyer representing Lindner Growth Fund.
Ready to sell shares
If the poison pill is triggered, all shareholders except Lindner, Manitoba Pool Elevators and Alberta Wheat Pool will be able to buy large volumes of newly issued UGG shares at a heavily discounted price.
McNicol told Justice J. A. Scollin it would reduce Lindner’s holdings in UGG to 0.8 percent and reduce the value of its investment by as much as $8 million.
The court had been asked by UGG to rule on whether the poison pill had been triggered.
While the issue of who owns the Lindner shares was crucial to the outcome, there was also argument over whether the court should even issue a ruling.
Lawyers for the pools and Lindner said UGG was simply seeking “free legal advice” by taking its application to the courts and trying to use the courts as part of its business strategy.
If UGG’s directors think the poison pill has been triggered, they should act accordingly and live with the consequences. That would most certainly mean being sued for damages by Lindner and the pools and perhaps other shareholders.
“There is a game of chess being played,” said McNicol. “In effect the court is becoming a pawn in that game and that shouldn’t happen.”
He urged Scollin to dismiss UGG’s application.
UGG lawyer Scurfield said both sides are employing a variety of tactics in the fight for the company, but that doesn’t mean the court doesn’t have a legitimate role to play.
It’s easy to say UGG’s board should have the guts to make a decision on the poison pill, but there are serious and difficult legal issues involved, he said, adding the directors made a “rational and responsible” request to the court for assistance.
