CANADA

Legal beagles track the buck

Rita Christopher,Roderick McQueen May 14 1979
CANADA

Legal beagles track the buck

Rita Christopher,Roderick McQueen May 14 1979

Legal beagles track the buck

CANADA

The first spectator last week was an elderly, nondescript hanger-on who sat reading Postal Life in one of the few revolving easy chairs in the New York courtroom. Only after more than 100 people had jammed in did he bother to ask what titillating trial was scheduled for that afternoon. “Securities,” he was told. Disappointment flashed across his face, he closed his magazine and left to find a better scandal. His empty chair was grabbed up by one of the wall-to-wall lawyers gathered as Brascan Ltd. took on Edper Equities Ltd. At issue was Edper’s sur-

prise purchase, earlier in the week, of 6.7 million Brascan shares worth $175 million—almost one-third ownershipon the American Stock Exchange (Amex). After watching F. W. Woolworth Co.’s legal wrangling to fight off Brascan’s $1.3-billion take-over bid last month (Maclean's, April 23), Brascan has adopted a few manoeuvres of its own. Last week it sought investigations by the federal department of consumer and corporate affairs, as well as the Ontario Securities Commission, and obtained a temporary restraining order in the U.S. district court of Southern New York, thus halting Edper’s purchase. It was the continuation of that order before Judge Pierre Levai that packed the third-floor courtroom Thursday with enough lawyers for even the judge to comment on the money machine set in motion. When Brascan lawyer William Manning appealed to stop the “action” (trading in Brascan), Judge Levai said to tension-breaking laughter: “Surely you don’t mean the action for the lawyers?”

Edper had purchased 3.3 million shares Monday on the Amex after the Ontario Securities Commission had rejected a request the previous week by Edper to buy Brascan on the Toronto Stock Exchange if Brascan’s bid for Woolworth failed. According to Edper Chairman Peter Bronfman, he was so opposed to the Woolworth bid “it was incumbent on Edper to either put up or shut up.” He put up—and bought 13 per cent of Brascan to go with the five per cent he already owned. Speaking for

owners of an additional 15 per cent of shares, he asked Brascan to abandon its bid and call a shareholders’ meeting to discuss management’s actions. When there was no positive response, Edper bought an additional 3.4 million shares Tuesday to hold about 31 per cent itself, now claiming to speak for about 45 per cent.

With Woolworth Chairman Edward F. Gibbons a front-row spectator, counsel for Brascan attempted to portray it as champion of the little guy with Edper cast as a masked and private Lone Ranger manipulating large institutions into selling blocks of Brascan shares because its legal-tender offer in Canada had not been approved. “The small Brascan shareholders never knew what was going on,” as Edper moved on the U.S. exchange, Brascan argued. Edper acted like the girl who breaks an engagement. Referring to the Monday statement indicating it owned sufficient shares of Brascan and to the further Tuesday purchases, Edper counsel Raymond Fells asked: “Is it against the law to change your mind? We learned our acquisition was not enough to prevent Brascan from going ahead with the Woolworth offer.” A procession of lawyers from the Amex and New York Stock Exchange, as well as lawyers acting for individual brokers, argued that massive confusion would occur if Edper’s purchases were blocked.

Judge Levai agreed, allowing the 6.7 million shares to change hands, but before he could rule on Brascan’s request that Edper be barred from acquiring further stock or proxies, word came that the Securities and Exchange Commission had suspended Brascan trading until May 12.

The proceedings before Judge Levai continue this week as the boardroom power battle is fought on three other fronts. South Carolina is investigating the Woolworth bid, the New York attorney-general holds hearings May 10 and the Brazilian House of Representatives is to investigate the deal that gave $477 million to Brascan when it sold Light and set Brascan on the take-over trail.

As Judge Leval’s courtroom emptied, interest turned to the other good show in town that day: sold-out hockey, available only on cable television. One Canadian in the courtroom had his priorities straight. As the elevator door closed, he shouted back to a New Yorker: “What bar can you see the Ranger-Islander game at?”

Rita Christopher/Roderick McQueen