March 15, 2002 - Still more grousing over Hydro One
Someone, somewhere, thinks 'RBC's written submission was woeful in its lack of understanding'
Barry Critchley
Financial Post
Glenn Lowson, National Post
Eleanor Clitheroe, president and chief executive of Hydro One, didn't respond to an e-mail.
The brown envelopes continue to arrive in the Don Mills newsroom concerning the recent decision by the Ontario government to award the mandate to lead the initial public offering of Hydro One Inc. to BMO Nesbitt Burns, Goldman Sachs and RBC Dominion Securities.
Granting the mandate to those three was a surprise, given that prior to the beauty contest only Goldman Sachs had either advised the government (the seller) or the company. Many felt CIBC World Markets (a long-time advisor to the government) and Scotia Capital (which advised the company) were the front runners.
In the end, the work that those two firms did -- work which was billed out at concession rates -- amounted to a hill of beans. Instead, the government -- through its agent SuperBuild -- set up a process and ranked the firms according to four criteria.
If firms scored sufficiently high on those four measures they were invited back for a presentation, a 30-minute session, a chance to strut their stuff. The final decision was then made.
This column has reported on two major concerns about the process:
- The close ties between RBC Dominion Securities and Jim Flaherty, the Minister of Finance who also oversees SuperBuild. The ties relate mainly to fund raising that individuals at the firm have undertaken for Mr. Flaherty, the politician who hopes to replace Mike Harris as premier later this month;
- The bureaucrats decided to get in on the act.
Allegations are swirling that they intervened to look after one of their own, Tony Salerno, the former chief executive of the Ontario Financing Authority and now an investment banker at BMO Nesbitt Burns.
The latest envelope contained more supposition. The highlights include:
- The claim that "RBC's written submission was woeful in its lack of understanding of Hydro One's financials. Ask Eleanor," said the letter.
An e-mail asking for a comment was sent to Eleanor Clitheroe, Hydro One's chief executive, but did not receive a reply.
- The allegation that BMO and GS were allowed to change their submitted bids, even though they were higher than more qualified firms.
- The view that "the selection process was hijacked by carefully selected plants who knew nothing about electricity, Hydro One, or equity issuance."
- The assertion that "many obvious credentials of some unsuccessful applicants were manipulatively ignored to generate a desired result."
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Spring may be just around the corner, but that hasn't improved the mood of shareholders who are upset at the way management of some companies are behaving.
Last week a group of angry shareholders of Clarica Life Insurance Co. came very close to overturning the all-paper offer from Sun Life Insurance Co. of Canada. They were upset at the behaviour of Clarica's directors, who by agreeing to a $310-million break fee demanded by Sun Life effectively prevented the company from being put up for auction.
This week Plaintree Systems Inc. announced it would solicit proxies to support a slate it was proposing for the board of Unique Broadband Systems.
If it gets control, the plan is to see whether the two companies can explore a business relationship. Yesterday, Plaintree went one better and indicated that the business relationship it wanted was a takeover: it would offer 1.3 of its own shares for each UBS share while paying out a 15¢ a share special dividend.
UBS is sitting on a pile of cash. Most of that cash came from a March 2000 issue of 1,000,060 special warrants at $40 a share. Scotia Capital led the deal, while Thomson Kernaghan and Goepel McDermid were in the syndicate.
Now comes word that a group of 58 dissatisfied shareholders of TSI TelSys Corporation is planning to solicit proxies to replace the current directors from the company with a market cap of $3-million.
The action is being led by a group of U.S. investors and includes founders and former directors of TSI TelSys. The group said that "they have become increasingly concerned that neither the current management nor the current directors of TSI TelSys have the strategic vision required to maximize the value of TSI TelSys to its shareholders."
The group -- known as TSI TelSys Shareholders for Improved Corporate Governance -- said it was "deeply concerned" about the company's performance under the current board and the recent decision to sell its only operating subsidiary, TSI TelSys Inc., for US$1.5 million. The group has proposed a slate of nominees.
bcritchley@nationalpost.com
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