Jarislowsky calls for shareholder vote on SNC's 407 sale
Billionaire investor and former SNC-Lavalin Group Inc. director Stephen Jarislowsky is urging the engineering giant at the centre of a political scandal to allow its shareholders to vote on the partial sale of its stake in the Highway 407 toll road in Ontario.
“The board of SNC-Lavalin is seemingly content to deny shareholders the chance to retain a top-quality investment. Instead, with this 407 sale, shareholders are forced by its own board to gamble on rescuing a now near-worthless asset, a deal that strikes me as cruel and Machiavellian,” Jarislowsky wrote in an open letter published Monday on the website of the Canadian Foundation for Advancement of Investor Rights (FAIR Canada), where he is a director.
“At the very least in this case, a free vote by the shareholders should be mandatory before the 10 per cent sale of the 407 is permitted even if current law permits it,” he added. “The business community as well as the securities commissions should stand up against this possible betrayal of the rights of shareholders and allow just such a free vote before permitting this transaction.”
Earlier this month, SNC agreed to sell most of its stake in the Highway 407 in Toronto to OMERS for up to $3.25 billion. Under the terms of the transaction, SNC will cut its stake in the highway to 6.76 per cent from 16.77 per cent. It will receive $3 billion when the deal closes, and $250 million in conditional payments over a 10-year period. The deal is expected to be completed within two months.
Jarislowsky questioned why the company would want to give up most of its stake in the highway, which he calls a “superb asset.”
“The investment asset in the 407 at some 80 per cent of market value is one of the finest investments that I know, as it is quasi government-guaranteed, plus enjoys the full growth of the traffic around Toronto, including the development of further roads and maintenance connected to the 407,” Jarislowsky wrote.
“Why would one not remain invested in such a superb asset after having suffered in the market as a result of the dishonesty and its aftermath?”
"Selling capital assets is very much in the ordinary course of our business," SNC said in a statement. "The potential sale of a portion of Highway 407 ETR has been publicly disclosed every time it was considered."
Should shareholders get to vote on SNC’s Highway 407 sale?
In 2015, SNC was charged with corruption and fraud for its business dealings in Libya. The case returned to the spotlight in February following a Globe and Mail report that then-attorney general and justice minister Jody Wilson-Raybould faced political pressure to intervene in the case, after the Public Prosecution Service of Canada declined to enter a negotiation for a remediation agreement with SNC. An agreement would have allowed the company to resolve the matter and avoid a criminal trial.
In his letter, Jarislowsky called into question why the federal government has been reluctant to negotiate a settlement, arguing that many advanced economies use fines rather than criminal prosecution in order to preserve jobs of employees that were not involved in the criminal activities.
“SNC-Lavalin was ordered to face criminal charges by a minister with good intentions, yet little experience,” Jarislowsky wrote.
“To date, this error has not been reversed, a situation I have difficulty understanding. After all, individual people are guilty of crimes, not shareholders nor loyal employees. To fine the shareholders doubly, when they had no impact on poor decisions, makes little sense.”
In their statement, SNC said it appreciates Jarislowsky’s remarks on the appropriateness of a remediation agreement.
Jarislowsky served as director of SNC Inc. and SNC-Lavalin from 1975 to 1996.