Activist Shareholders Go to Court to Defy Canon-Océ Acquisition

Kaspar Roos
Feb 23, 2010

The proposed acquisition of Océ by Canon is still not certain as it emerged that activist shareholders Hermes Asset Management, owning 3.3% of Océ’s shares, and The Universities Superannuation Schemes, owner of 1.8%, have asked a court in Amsterdam to conduct an investigation about the negotiations that took place between Canon and Océ. Since Canon made the offer, there has been resistance from certain shareholders as they argue that Canon’s proposed €8.60 offer per share undervalues Océ, and that higher returns can be achieved if each of Océ’s business groups is separately divested.

During the course of last month, more minority shareholders have joined the opposition, and they currently represent around 20% of Océ’s shares. Although no details have been given, we can assume that the court action specifically aims to investigate the validity of two decisions made in an extraordinary general meeting of shareholders on February the 12th. . In that meeting Océ replaced three members of the supervisory board with executives from Canon, coming into effect if or when Canon makes the offer unconditional. The minority shareholders argue that having Canon executives as supervisory board members will not serve their interest if they remain as minority shareholders under the new owners.

The second contended decision pertains to the conversion of a 19% share of preference shares, which were used for the financing of a former acquisition. Those shareholders are given priority in the payment of dividends, but typically do not have voting rights. Océ has decided to convert those preference shares into ordinary shares (that come with voting rights), thereby diluting the shares of the opposition as the preference shares are in possession of companies that have already announced their support of the acquisition.

As mentioned in a previous blog on this issue, shareholders in continental Europe have less influence on corporate governance than in the U.S. or U.K. In the Netherlands, companies have been able to successfully outmaneuver minority shareholders in the past, and Canon has made it clear that it aims to get hold of 100% of Océ’s shares. In its offer memorandum, dated 28 January 2010, it specifically mentions the legal merger (see previous post) as an option to gain full control of Océ. For activist shareholders, going to court can be the last resort they have.

Océ said in a press release it regrets this step and will oppose the request of suspension of the resolutions taken. The court hearing is scheduled for March 3rd.

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