TransAlta Slate Wins Glass Lewis Support Amid Proxy Threat

TransAlta Corp. won support for its board nominees from a prominent shareholder advisory firm that noted two activist investors threatening a proxy fight haven’t filed the paperwork with regulators for their own candidates.

Glass Lewis & Co. said it believed there was no substantial issue with any of the Alberta utility’s 12 nominees, including two affiliated with Brookfield Asset Management Inc., related to the asset manager’s C$750 million ($563 million) TransAlta investment announced last month. The investment would allow Brookfield to convert its investment into an equity interest in TransAlta’s Albert hydro assets at a later date.

Separately, activist investor Mangrove Partners, working with an entity controlled by C. John Wilder’s Bluescape Energy Partners, filed an application Tuesday with regulators in Ontario and Alberta seeking a determination whether TransAlta should separate the shareholder vote on the Brookfield transaction from one on its directors. Mangrove also wants to push back the annual general meeting, the filing shows.

TransAlta said when announcing the deal that it was determined that the transaction didn’t need to go before a shareholder vote. A representative for the Calgary-based company declined to comment on the Glass Lewis recommendation and wasn’t immediately available to comment on the Mangrove filing.

The investor duo disagrees and is seeking additional information related to how the Brookfield transaction came about and how it was determined to be the best way forward. That includes any communications between Brookfield and TransAlta in the prior 12 months, any negotiations in the lead up to the deal with RBC Global Asset Management, which said it would support the transaction, and other undisclosed details, according to the filing.

‘Abusive’ Transaction

The activists argue in their filing that the transaction is “abusive” to shareholders and undervalues the firm’s hydro assets.

“The commissions should make the orders sought which will ensure that shareholders are given a fair opportunity to vote for directors without the vote constituting a ‘referendum’ on the Brookfield transaction, and to vote for or against the Brookfield transaction, based on full and fair disclosure of the events leading up to it,” they said.

Glass Lewis said it didn’t opine on whether shareholders should support the activists’ slate because, as of Monday, they hadn’t filed a definitive proxy for their five candidates. Saying they were concerned about the Brookfield deal, the two had argued that, if at least two directors not on the company’s slate were elected, TransAlta would be free to vacate the transaction and pursue other options under the terms of the agreement.