Ontario Teachers' Pension Plan is a major shareholder of Maple Leaf Foods, owning 33% of the company's equity.
As with Maple Leaf Foods, Ontario Teachers is breaking its own rules, by controlling more than 30% of the votes of BCE. Canadian legislators wisely did not want any one pension fund exerting too much influence over Canadian companies or constrain them artificially. Teacher’s does not have the financial capacity to own 50% of BCE. By over-reaching in its investment in BCE, Teachers’ had to resort to destroying the credit worthiness of the company at the cost of $1 billion to its present bond investors and at the cost of dramatically increasing the company’s cost of capital and in turn, BCE’s competitiveness. This financial incapacity on the part of Tecahers’ has resulted in the company reneging on its obligation to pay promised dividends to its shareholders of some $1 billion, the firing of 2,500 employees and the announcement of a capital-light investment plan that will do nothing to see Canada advance in the delivery of state of the art telecommunications.
Teachers’ also leaned on many groups to support its application before the CRTC. One such party was Maple Leaf Foods. It is interesting to read what Micahel McCain highlighted in his letter to the CRTC about what was of primary investment concern to Teachers’:
“Teachers’ recognizes our need to invest in marketing, advertising and community involvement.”
That statement is most insightful for what it doesn’t say, as Teachers’ seems to prefer fluff like marketing and advertising, over the real stuff like investments in product safety and world class facilities, not worthy of mention by Michael McCain to the CRTC.
Here is the full letter
January 18, 2008
Re: Broadcasting Notice of Public Hearing CRTC 2007-19
Support for the application by BCE Inc. (BCE) to effect a change in ownership and control
As President and CEO of Maple Leaf Foods, I am pleased to submit our company’s support for the application of BCE for a change in ownership and control of the company to a group of investors that is lead (sic) by the Ontario Teachers’ Pension Plan.
Maple Leaf Foods is Canada’s leading food processor, supported by our flagship consumer brands – Maple Leaf, Schneiders and Dempster’s and a family of strong regional brands. We are market leaders across our businesses and intend to sustain strong profitable growth through meeting customer and consumer needs for the highest quality, most nutritious and innovative food products – from farm to fork.
A factor in our company’s success and leading position, Ontario Teachers’ Pension Plan has been a major investor in Maple Leaf Foods for more than 12 years. Although Teachers’ initial investment was a private equity investment alongside the McCain family, their long term investment focus has been illustrated by the fact that they remain a significant investor in our company today, years after the initial public offering of our company.
Teachers’ focus has been one of supporting strong Canadian companies over the long term, rather than expecting a small quick result. Teachers’ supported our executive team and board of directors in our successful efforts to strengthen the business and improve its value, especially our growth strategy which includes strategic acquisitions. Their vision, long term value creation horizon, and keen respect for all our stakeholders has been foundational to Maple Leaf Foods.
Teachers’ recognizes our need to invest in marketing, advertising and community involvement. With 73 per cent of our $6 billion in annual sales generated in Canada, Maple Leaf Foods has a high profile and strong presence across the country, especially as a major Canadian media buyer. We donate one per cent of our pre –tax profits to worthy causes in the form of both cash and in-kind gifts.
We believe the Teachers’-led investment team will provide BCE with the resources it needs for continued and renewed success, as it has, and does, for Maple Leaf Foods.
Michael H. McCain
Wednesday, August 27, 2008
What kind of corporate culture does it instill, when your controlling shareholder is breaking its own rules?
Posted by Fillibluster at 8:56 AM