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New Kingsdale CEO Plots Cross-Border M&A, ESG

Published: March 23rd, 2022
The proxy solicitor's recently appointed CEO, Ian Robertson, says climate change, diversity and cybersecurity risks are all top issues for large institutional investors and their growing policy teams in Canada, even as the power of large proxy advisers diminishes.

Editor’s note: The original version of this article was published in October 2021 on The Deal’s premium subscription website and has been edited to account for subsequent events. For access, log in to or use the form below to request a free trial.

Climate change, diversity and cybersecurity risks are all now top issues for large institutional investors and their growing stewardship teams, while the power of large proxy advisers is diminishing.

That’s the view of Ian Robertson, 42, a senior executive and seven-year veteran of proxy solicitor Kingsdale Advisors. Robertson was promoted in October to become chief executive of the Toronto-based provider of proxy solicitation and strategic shareholder and special situations communications services. The adviser’s former CEO, Amy Freedman, departed the role at the end of 2021.

“We’re seeing more retail shareholders playing an active role at the same time as we are seeing the influence of proxy advisers start to wane as institutional investors develop their own policy teams,” Robertson told The Deal. “New issues are emerging. People are looking for solutions to climate change, diversity and cybersecurity risk.”

Kingsdale, which also has an office in New York, is the largest provider of proxy solicitation, shareholder and special situations communications services in Canada to both corporations and activist investors engaged in director contests or other disputes, though much of its business involves advising companies facing challenging executive compensation or stock option plan votes at annual meetings. The company’s founder, Wes Hall, left U.S. proxy solicitor Georgeson LLC in 2003 to start Kingsdale, with a Canadian and cross-border focus.

As CEO, Robertson said he will seek to enlarge the company’s Canadian and U.S. presence and focus on strategic initiatives.

“For every [Canadian] proxy fight, we’re called by both sides to see who can retain us,” Robertson said. “Our modus operandi is to defend companies, but if companies don’t need our help, we also work with shareholders to effect change. We think there is an advantage in knowing how both sides think.”

Before joining Kingsdale, Robertson spent 16 years in various roles in Canadian federal and provincial politics, including serving as a chief of staff and campaign manager to Progressive Conservative Ontario Premier candidate Tim Hudak. “The skill set I honed in politics applies here, but the laws of gravity in terms of the regulations for elections and otherwise are different here,” he said.

Pivotal Battle on the Home Front

Robertson and Kingsdale advised Christopher Hohn’s TCI Fund Management Ltd. in its campaign and minority-slate proxy contest targeting Canadian National Railway Co. (CNI), the largest North American director battle of the year after Engine No. 1’s fight at Exxon Mobil Corp. (XOM).

TCI sought to install outside candidates on CN’s board as part of a campaign to remove chairman Robert Pace and CEO Jean-Jacques Ruest after CN’s failed attempt to buy Kansas City Southern (KCS). CN and Hohn settled in a deal that will add two mutually agreed upon directors, and the railroad installed new CEO Tracy Robinson.

The fight was reminiscent of activist Bill Ackman’s 2012 director contest at Canadian Pacific Railway Ltd. (CP), which led to the installation of a new CEO, now-deceased Hunter Harrison, and a turnaround that drove the railroad’s share price up nearly 190% during Harrison’s tenure. Kingsdale advised Ackman in that battle, which Robertson argued was first-of-its kind in Canada because it was such a big shakeup at an iconic, blue-chip Canadian company.

At CN, a “mutually agreed to” special meeting to vote on TCI’s candidates was set for March 22, roughly six months after the activist requisitioned the meeting. Robertson noted that Canadian case law generally allows corporations to push out special meetings about 155 days from the date they were requisitioned and special meetings that take place near annual meetings are often combined into the annual meetings.

Corporations have advanced notice bylaws for AGMs, giving them more flexibility to replace incumbent directors in advance of an annual meeting “if they know they are going to lose otherwise.” Special meetings, alternatively, give companies less flexibility for contests.

Indexes May Flex Cross-Border Sway

Kingsdale, in its proxy solicitation role, has developed relationships with the big three U.S. index fund managers — BlackRock Inc. (BLK), Vanguard Group Inc. and State Street Corp. (STT) — giants that are often the large shareholders of Canadian corporations, though their investments in particular companies represent an immaterial percentage of their large multitrillion-dollar funds.

“U.S. index funds can own 6% or 7% stakes in Canadian companies,” he said. “A lot of Canadian companies view the big three index funds as critical investors, but those positions may not be material to them.”

BlackRock, with $9.5 trillion in assets, on Oct. 7 announced that in 2022 it will give roughly 850 of its biggest institutional investor clients with $1.5 trillion in assets the option to vote shares connected to their investments. Robertson said he wondered whether those funds have the capacity or interest in analyzing the hundreds or thousands of voting decisions, when the alternative is to continue to let BlackRock make voting choices for them.

“More institutional investors are developing their own policies on diversity and climate change and taking a more active role on contested situations,” he said.

The proxy solicitor also frequently advises corporations faced with controversial nonbinding shareholder proposals, focused on ESG issues. Unlike in the U.S., most Canadian shareholder proposals are withdrawn in advance of meetings as opposite sides reach a compromise.

“Shareholder proposals typically never get voted on because shareholders and companies have a collaborative working relationship,” he said. “A lot of proposals [in Canada] are on climate change risks, and we are seeing more on gender and [Black, Indigenous and People of Color] diversity.”

A Unique Perspective on Cross-Border Deals

In addition, Robertson argued that Kingsdale specializes in Canada-U.S. cross-border M&A situations, involving companies listed on both the Toronto Stock Exchange and Nasdaq. In most M&A situations, Kingsdale will advise corporations, though at times it will work with activist investors targeting a deal.

In 2019, Kingsdale advised then-publicly traded Hudson’s Bay Co. in its response to a campaign launched by Land & Buildings Investment Management LLC’s Jonathan Litt.

It also worked with Canadian fund Catalyst Capital Group Inc. in its effort to intervene in Corus Entertainment Inc.’s 2016 C$2.65 billion acquisition of Shaw Communications Inc.’s (SJR) media assets, as well as Los Angeles-based Oaktree Capital Management LP in its last-minute but ultimately successful 2017 campaign targeting Rayonier Advanced Materials Inc.’s (RYAM) $1 billion acquisition of Tembec Inc. Following Oaktree pressure, Rayonier hiked its acquisition bid by 17%.

“We not only understand the laws and processes on both sides of the border but we also have deep relationships with investors on both sides of the border,” Robertson said. “Oaktree called us on a Sunday, and within seven days we got the bidder to hike their bid, following an aggressive campaign.”

Kingsdale on Oct. 6 announced it had hired Kelly Gorman, a former regulator at the Ontario Securities Commission who helped set up a corporate whistleblower program in Ontario, as executive vice president for governance. It also added Tom Graham, ex-corporate finance director at the Alberta Securities Commission, as an executive vice president.

The new executives were brought on in anticipation of significant regulatory changes in climate disclosure and Canadian regulatory changes for corporations, Robertson said.

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