One of Vancouver’s best-known investors and philanthropists is plotting a boardroom coup because of numerous disagreements with a soil remediation company’s board.
Sam Belzberg told Business in Vancouver that he is frustrated that the board of Bennett Environmental Inc. (TSX:BEV) has “not done anything to enhance shareholder value.”
Specifically, he gripes that the company:
- is attempting, without a shareholder vote, to ram through a merger that is “dilutive, high-risk and non-arm’s-length;”
- has not made any “value-enhancing” acquisitions despite declaring two years ago its intention to make some;
- passed up the opportunity to buy one of Belzberg’s companies at a price that was less than what the company eventually sold for;
- has a board with a “lack of transaction experience”;
- is burning money while idling its only soil remediation plant in Quebec;
- has a “highly unusual stock option backstopping guarantee” that enables management to exercise stock options and then sell the resulting stock to a securities dealer instead of the open market – a situation that allows directors to get the best possible price while leaving the company with the risk of reselling the shares at a lower price;
- is considering issuing a cash dividend when that money would be better spent making acquisitions; and
- paid a director $93,000 in 2010 and $50,000 so far this year to draft letters of intent and perform due diligence – a situation that he believes taints the independence expected of board members.
“It’s a shame, but sometimes you have to do certain things in life to keep going,” Belzberg said.
Shareholders have until June 24 to have their proxy votes received by the company.
A meeting will then be held June 29.
Belzberg embarked on his successful business career by founding City Savings and Trust in Edmonton in 1962. He moved to Vancouver in 1968 and eventually built his First City Financial Corp. into what was reported to be a $7 billion company.
He is quick to say he is not a billionaire. He has, however, given several $1 million donations to Simon Fraser University. First, it was so the university could create the Samuel and Frances Belzberg Library. More recently he donated $1 million to the university’s Wosk Centre and $1 million to its new SFU Woodward’s campus.
The 82-year-old’s Second City Capital Partners owns a 23.2% stake in Bennett.
He has convinced I.A. Investment Counsel Ltd., which owns a 18.2% stake in the company, to back his preferred slate of directors:
- Farris Vaughan Wills and Murphy LLP partner Mitchell Gropper;
- Greenstone Venture Partners partner Livia Mahler;
- McMillan LLP partner John Reynolds;
- Second City managing director Jamie Farrar; and
- Toronto private equity expert Ian Kidson.
Belzberg and his supporters are now attempting to convince shareholders who own the remaining 68.6% of the company to back that slate.
“Read his letter to shareholders. It’s offensive,” Bennett’s current CEO Jack Shaw told Business in Vancouver. “I find it offensive that Mr. Belzberg has pretended that certain things weren’t disclosed.”
Bennett’s core business is remediating soils that have persistent organic compounds (POCs), which are difficult to remove from soil. It’s an expensive service that customers would not buy if regulators did not force them to.
Shaw describes the business as “lumpy” because work comes in fits and starts.
The company’s thermal treatment facility is most efficient when it operates around-the-clock. So Bennett’s plant operates at full capacity for several months and then temporarily shuts down. Shaw expects to reopen the plant in August.
Shaw defended his board’s experience stickhandling acquisitions and said that there is no requirement that directors have large stakes in the company.
“I hold 600,000 shares that are currently trading at $2 each,” Shaw said.
“For me, that’s a disproportionate amount of my net worth.”