Go figure.

Armed with the same information and presumably with similar access to the same group of participants, two proxy advisory firms have reached completely different conclusions.

This week, ISS advised its clients to vote against the privatization of Sirius XM Canada because “the consideration appears to undervalue the company given its historic revenue growth as well as management’s own projection of likely continued revenue growth.”

ISS also was critical of the process, specifically of the Canadian company not running a public auction or “market check process;” of the valuation methods used by the two firms hired to perform a fairness opinion; and, for those firms using an overly negative outlook for two elements of the local company’s business.

Toss in the effects of a “high” weighted average cost of capital and the valuation/fairness opinion becomes even more controversial. ISS also noted the $0.25 a share price hike wasn’t real because shareholders won’t receive two dividend payments.

Now another firm, Glass Lewis, after deciding the $4.50 a share offer was a “fair and acceptable price,” advised shareholders to “vote for this proposal.” But their support was neither overwhelming nor effusive. Muted may be a better description.

Consider this, from the Glass Lewis report: “In conclusion, in light of the uncertainties and operational dependency impacting the Company’s business and potentially limiting its growth prospects as a separate listed company, we believe the proposed transaction may reasonably represent the best opportunity to maximize shareholder value.”

Now consider this: “The recapitalization and privatization transaction involving the U.S.-listed Sirius XM would seem to eliminate many of the long-term issues acting as an overhang on Sirius XM Canada’s business viability and financial prospects while also positioning the Sirius XM business to better confront the challenges of increased competition and a dynamic and evolving industry.”

Finally this: “We believe a reasonable basis exists to conclude that the proposed privatization involving Sirius XM and certain significant Canadian shareholders represents the most logical and attractive option for minority shareholders.”

But Glass Lewis has some criticisms of the work done by National Bank Financial, which provided a second fairness opinion. For instance, NBF “didn’t provide any details, such as a specific valuation range, as to how it concluded that the offer price was fair.”

Shareholders now have to assess the different views of the two proxy advisory firms before making their decision prior to the Aug. 30 meeting.

Shareholders may also have to consider what the OSC may decide. A group of dissident shareholders, all institutional investors, have filed a complaint with the OSC focused on a number of matters including the unfair price and the transaction not being in the best interests of independent minority shareholders.

The dissident group has also focused on what it terms the “coercive” tactics used by the parent in the lead up to the offer, tactics that seemed to depress the share price.

Then there is the question of the status of the CBC as a minority shareholder. (It owns 10 per cent.) The dissidents argue that because of the CBC’s continuing commercial relationship with Sirius XM Canada, after the privatization it’s in a different situation than other shareholders. There are precedents for what the dissidents are claiming.

Sirius XM Canada’s special situation — particularly its large dependence on the U.S. parent for programming and apparent desire for more fees against the backdrop of majority Canadian ownership — may attract the eye of another regulator, the CRTC. In other words, lots of potential developments.

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