Quebec-based MAAX changes hands again
Brookfield sells to U.S. company
Pass the parcel is alive and well at Quebecbased MAAX Inc., a manufacturer of bathroom products and accessories.
For the third time in the past 13 years, the company, formed in 1970 and which in its heyday employed 3,800 people in 24 plants and distribution centres in North America and Europe, has a new owner.
If t he t i meline is extended to the past 20 years, the company has had four owners given that it went public in 1997. Since then it has been sold to a private equity consortium, suffered t hrough t he U. S. f i nancial and housing crisis and gone through a restructuring where its major lender, Brookfield Capital Partners, acquired control. It is a significantly smaller company than it was at its peak.
American Bath Group is MAAX’s newest owner. This month the Tennessee- based company — which itself was acquired for US$750 million by a private equity owner, Lone Star Funds, last September — won the right to the keys to the company.
American Bath bought MAAX f rom Brookfield, which acquired control in 2008 because it provided the capital to the private equity consortium t hat bought MAAX in the summer of 2004 for $ 640 million.
Boston- based J.W. Childs Associates, Borealis Private Equity and Ontario Municipal Employees Retirement System were in the consortium. Brookfield made Mark Gold MAAX’s chief executive in 2010. We were unable to reach Gold.
The refrain runs this way: there is nothing wrong with dual class of share companies, provided there are coattail provisions because in the event of a takeover, all shareholders will be treated equally.
To t hat argument t he proponents add another: investors like to know that those who built the company that is now going public still have a large stake because it gives them comfort in the investment they are about to make.
Maybe, but Anita Anand, the J. R. Kimber Chair in Investor Protection and Corporate Governance at the University of Toronto, has a different take. In her view, there is “a potential” for shareholders to be mistreated in a buyout situation.
“We s aw t hat in t he Magna situation,” she said, noting that in return for collapsing its dual classes of shares the company agreed to pay the Stronach family a ton of cash and stock. In return the market rewarded the holders of Magna’s subordinate voting shares with a pop in the share price.
Overall, Anand said there are “very few safeguards,” for investors who purchase shares in dual- class companies. She added that “it’s well acknowledged,” that corporate governance models that have a dual- class structure are “somewhat problematic” and not perceived well by many sectors of the market.
Given the dearth of IPOs in Canada — a pattern that mirrors the situation in the U. S. — and the recent trend for those that go public here to have two classes of shares — Anand argued it’s time for regulatory action.
“To me it’s incumbent on securities regulators to look at dual- class share structures and to ensure that there are safeguards f or subordinate shareholders in the going public situation and in the buyout situation,” she said.
While the TSX has mandated that coattails be included for all new companies that go public, Anand said a change of control can occur in situations other than a takeover. One way i s proxy contests where, she says, the coattail “provisions don’t necessarily apply,” meaning “you can’t ensure fair treatment of the subordinate shareholders merely by the coattail provisions that the TSX mandate.”
INVESTORS IN DUAL-CLASS COMPANIES HAVE FEW SAFEGUARDS.