Activist Bans Called 'Extraordinary' by Canadian Regulator

  • OSC said it's concerned about restrictions on share resales
  • Icahn, Ackman and Loeb blacklisted by drugmaker Concordia

Canadian regulators said they are concerned about bans some companies have imposed on the resale of their shares to activist investors.

"While we do not generally comment on any specific issuer or practice, we are concerned about extraordinary actions by issuers that may deter or hinder shareholder activism that is otherwise compliant with corporate and securities laws," Naizam Kanji, director of the mergers and acquisitions office at the Ontario Securities Commission, said in an e-mail.

The regulator was responding to a Bloomberg News story on Monday showing that Canadian drugmaker Concordia Healthcare Corp., which had sold a 14 percent stake to private-equity firm Cinven this year, had banned the transfer or resale of those shares to a list of almost 60 activist firms, including those run by Bill Ackman, Carl Icahn and Dan Loeb. At least seven other companies have taken similar precautions against activist firms when using their shares as currency for an acquisition.

These bans have gone largely unnoticed by the activist managers, who say shareholders may be harmed when a company limits who can buy its shares. Executives at three well-known activist firms, while declining to be identified, said they weren’t aware that companies were placing restrictions on their activities.

Marija Mandic, a spokeswoman for Concordia, didn’t respond to a request for comment.

There are no U.S. laws preventing companies from using the resale restrictions, said Marc Weingarten, co-chair of the global shareholder activism group at Schulte Roth & Zabel, a New York-based law firm. Judith Burns, a spokeswoman at the U.S. Securities and Exchange Commission, declined to comment.

Kanji did not elaborate on whether Toronto-based OSC would take measures to prevent such agreements in the future or unravel existing ones.

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