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A large and traditionally passive Canadian investor has launched a proxy fight to overhaul a board, a relatively unique situation that experts believe could become more common in the future.
Sentry Investments Inc. announced plans on Monday to nominate six new directors to the board of Timmins Gold Corp., which it believes is underperforming. Sentry said it is calling for change after Vancouver-based Timmins ignored shareholder requests to allow potential acquirers to conduct due diligence.
Sentry’s portfolio managers are not to be confused with the Bill Ackmans and Carl Icahns of the world. The Toronto firm is a passive institution with more than $14-billion of assets, and has never shown interest in the nasty and very public game of proxy contests. But it owns 17% of Timmins and felt it had to do something major to create value.
Proxy fights have become common events in the Canada over the last several years, as markets have been volatile and investors have gotten increasingly frustrated with poor-performing stocks. The big Canadian institutions have not shown an appetite to lead these battles, but proxy guru Wes Hall of Kingsdale Shareholder Services said that attitude is starting to change.
“I think you’re going to find that more and more [passive] investors will do this,” said Mr. Hall, who is working with Sentry on this battle.
“They can’t just sit by and wait for Bill Ackman and Barry Rosenstein and others to come in and fix their problem for them.”
Portfolio manager Behrak Shahriari of Montrusco Bolton Investments (one of the few Canadian fund companies willing to wage proxy fights) said it is a fiduciary duty for funds to launch these contests when other options are exhausted.
“Sometimes delivering the best returns means that we need to foster changes,” he said.
Sentry built its stake in Timmins Gold over several years. It believes the miner’s board has not held management accountable despite missed production targets at the San Francisco mine in Mexico. Sentry also thinks the board needs better corporate governance and more independence.
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