Teachers to drop Maple Leaf control-sharing deal

An agreement that neatly organized control of Maple Leaf Foods will end next June, one of Maple Leaf’s two biggest shareholders says.

Maple Leaf Foods announced in its second-quarter results Wednesday that the Ontario Teachers Pension Plan Board has served notice to McCain Capital Corp. that the Teachers will terminate an agreement the two shareholders have had in place since 2001.

That agreement between the Teachers and McCain Capital, the Toronto food manufacturing company’s other largest shareholder, saw McCain Capital’s nominees take three seats on Maple Leaf’s 15-member board of directors, while the Teachers’ nominees took two.

The deal had also stipulated that the company’s CEO and seven directors were to be “mutually agreed to” by the two shareholders, Maple Leaf said.

The remaining three board members include Maple Leaf’s CEO Michael McCain, its agribusiness group chairman Scott McCain and its board chairman Wallace McCain.

“Accordingly, absent earlier termination or amendment by the parties, the shareholders agreement will no longer be effective after June 30, 2010,” Maple Leaf said in its report.

While the deal lays out the process for board nominations, the company’s corporate governance committee, board chairman and lead director manage the process in “consultation” with the two major shareholders, the company said.

Maple Leaf has previously said its corporate governance policy is for a majority of the company’s directors to be “independent,” meaning they’re not in Maple Leaf management and are free from “any interest which could be perceived to materially interfere with their ability to act in the best interests of the corporation.”

At the end of last year, the Teachers held 33.1 per cent of total issued and outstanding shares in Maple Leaf, while McCain Capital held 32 per cent.

The two shareholders in December purchased about $70 million in Maple Leaf “subscription receipts.” Of those, the Teachers bought $52.1 million’s worth.

The Teachers’ decision to end its agreement with McCain Capital was made public as Maple Leaf announced it will issue 7.37 million common shares on Aug. 4 to satisfy the subscription receipts.

“This decision reflects the company’s approach to ensuring that it maintains an appropriate mix of equity and debt in its capital structure and that these levels are maintained over time,” Maple Leaf said Wednesday.

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