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Ontario Teachers shed their Maple Leaf

Two major banks’ investment arms have signed a $362.4 million deal to buy about a 25 per cent stake in Maple Leaf Foods from the Ontario Teachers’ Pension Plan Board.

BMO Capital Markets and TD Securities have agreed to pay $10.50 per share for all of Teachers’ 34.5 million common shares in the iconic Canadian food processing firm.

Pending regulatory approvals, the bought deal is expected to close by about Dec. 16, Teachers and Maple Leaf said in a release Tuesday.

Maple Leaf, which gets no proceeds from the sale, said it has agreed to file and get a receipt for a preliminary short-form prospectus for the deal by no later than Monday (Nov. 29).

The pension fund’s announcement Tuesday that it would sell all its common stock in Toronto-based Maple Leaf came just a few hours after it said it would sell a 15.3 per cent stake to the two banks for $220.5 million, leaving the Teachers with just under 9.9 per cent.

No reason was given in the second announcement for the increase in the size of the sale.

Teachers in August had sold about an 11.4 per cent stake in Maple Leaf to funds controlled by West Face Capital, a Toronto investment management firm, for an undisclosed sum. That deal had included all of Teachers’ non-voting stock in Maple Leaf.

Poison pill

Teachers’ separate sales of its Maple Leaf holdings follow Maple Leaf’s decision in June to set up a “poison pill” plan on its shares. Teachers publicly opposed the company’s decision.

Maple Leaf said in June its poison pill — usually described by companies who adopt it as a “shareholders’ rights plan” — wasn’t a response to any “actual or anticipated transaction.”

However, such a plan stood to make a large stake such as Teachers’ less appetizing to an uninvited buyer.

A poison pill, if triggered by an unasked-for takeover bid, automatically floods the market with cut-price shares that are offered to every shareholder other than the unsolicited bidder, thus diluting the unasked-for bidder’s stake.

In Maple Leaf’s case, the company would “swallow” its pill by issuing new shares at a 50 per cent discount from the publicly traded share price, when or if any unsolicited shareholder were to gobble up more than 20 per cent of Maple Leaf’s publicly traded shares.

Neil Petroff, Teachers’ executive vice-president for investments, had criticized the plan as preventing Teachers “from exercising our legal rights as shareholders.”

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