Apr. 29, 2011 (Canada NewsWire Group) --
TSX Symbol: CIX
TORONTO, April 29 /CNW/ - CI Financial Corp. ("CI") today announced that it has received notification from the Toronto Stock Exchange that the continuation of CI's Shareholder Rights Plan for a further three-year term must be approved by a vote of all shareholders, including the Bank of Nova Scotia, in addition to a vote of only the independent shareholders of CI.
This decision by the Toronto Stock Exchange follows a request made to it by the Bank of Nova Scotia on April 1, 2011, to require CI to permit the Bank to vote on the continuation of the Shareholder Rights Plan. CI disagreed with the Bank's request and asked the Toronto Stock Exchange to permit the ratification vote to be conducted in accordance with the terms of the Plan. CI's Shareholder Rights Plan has a six year term, however the Board is required to provide independent shareholders with an opportunity at the 2011 Annual Meeting of Shareholders to decide whether they want the Plan to continue for the remaining three years. The Bank of Nova Scotia is not an independent shareholder, as that term is defined in the CI Shareholder Rights Plan because it has been excluded or "grandfathered" from the operation of the Plan. The Bank of Nova Scotia voted in favour of the adoption of the Plan in 2008, but has stated, through its counsel, in a submission to the Toronto Stock Exchange, that it did not understand the terms of the Plan and in any event, circumstances and expectations have changed, which is why it now wants the opportunity to vote on the continued existence of the Plan for the final three years of the term. One circumstance that has changed is that the Bank of Nova Scotia recently acquired DundeeWealth, CI's direct competitor.
The Toronto Stock Exchange does not require shareholder ratification for the continuation of an existing shareholder approved rights plan and accordingly, CI had asked the Exchange to agree that the terms of the Plan would govern this situation rather than create new rules and effectively amend the Plan at the request of the Bank of Nova Scotia.
Notwithstanding this, the Toronto Stock Exchange has today decided to, in effect, vary the express terms of CI's shareholder approved Plan and require CI to permit the Bank of Nova Scotia to participate in the ratification vote.
"We are shocked that the Toronto Stock Exchange has decided to favour the Bank of Nova Scotia and impose this change on CI's other shareholders. It defeats the purpose of good governance when the TSX can impose a change to the terms of our shareholder approved plan, as a result of pressure from the Bank. CI has no alternative but to comply with this decision and put this matter behind us," said Stephen A. MacPhail, President and Chief Executive Officer of CI. "We continue to be perplexed at what could have motivated the Bank of Nova Scotia to put CI through such a colossal expenditure of time and money. Since the Bank bought its interest in CI, our share price is up 43%, our assets under management are up 33% and our earnings per share (before interest, taxes, depreciation and amortization) are up 44%, so we can not see how, as shareholders, they are disappointed with CI's performance. The Plan is extremely important to the interests of all shareholders. We are confident that our shareholders, other than the Bank, appreciate the strategic importance of the Plan and the protection that it provides, and based on feedback that we have received to date, the independent shareholders who control 64% of CI's shares will overwhelmingly support the continuation of the shareholder rights plan."
The primary objective of the Plan is to enhance shareholder value and ensure that, in the context of a bid for control of CI, all shareholders are treated equally. The Plan precludes any accumulation of a significant stake in CI without offering a control premium to all shareholders. The Plan does not preclude a takeover of the company as long as the transaction is fair and in the best interests of the company, but it does provide the Board of Directors with more time to find an alternative value enhancing transaction.
The Bank of Nova Scotia currently owns approximately 36% of the outstanding common shares of CI. It was exempted from the operation of the Plan even though its ownership interest exceeds the Plan's triggering ownership threshold of 20%, which is the takeover bid threshold under Canadian securities laws. The Plan prevents the Bank from increasing its ownership position and, accordingly, the Bank is precluded from making a creeping takeover and acquiring control of CI without making an offer to all other shareholders. If the Bank of Nova Scotia sells its shares of CI, the purchaser will not be grandfathered and the acquisition will trigger the operational provisions of the Plan unless the sale is made pursuant to a take-over bid which meets the definition of a Permitted Bid under the Plan. The Plan ensures equal treatment of all CI shareholders in the context of a change of control.
CI has also announced that, if the shareholders approve the continuation of the Plan, they will be asked to approve amendments to the Plan. The Plan will be updated through the amendments to reflect the recommendations of the Institutional Shareholder Services in their Canadian Governance Policy and incorporate developments to shareholder rights plans since the Plan was adopted in December 2008.
CI's shareholders will be asked to ratify the continuance of the Plan and approve the amendments to the Plan at the annual and special meeting of shareholders, which will be held at 11:00 a.m. on June 1, 2011 at CI's offices at 15 York Street, Toronto. Shareholders of record on April 29, 2011 will be entitled to vote at the meeting. The management information circular, which will be mailed to shareholders in early May, will provide further details on this vote and other matters to be brought before the meeting.
CI Financial Corp. (TSX: CIX) is an independent, Canadian-owned wealth management company with approximately $98.9 billion in assets as of March 31, 2011. CI offers a broad range of investment products and services, including an industry-leading selection of investment funds, and is on the Web at www.ci.com/cix.
Stephen A. MacPhail
President and Chief Executive Officer
CI Financial Corp.