CALGARY – Enbridge Inc. urged its shareholders to ignore a below-market offer for its shares Friday from a well known, and widely criticized, Toronto-based investment firm.

TRC Capital Corp. has offered to buy 2.5 million Enbridge shares in a mini tender at $53.38 each — for total consideration of $133.45 million —, which Enbridge said is a roughly 4.5 per cent discount on its share price in both Toronto and New York from earlier this week.

The discount has widened to 6 per cent, as Enbridge shares rose 19 cents on the Toronto Stock Exchange on Friday morning to trade at $56.79 each.

“Enbridge does not endorse this unsolicited offer, has no association with TRC Capital or its offer, and recommends that shareholders do not tender their Enbridge shares to the offer,” the pipeline company said in a release.

TRC Capital has developed a reputation for its below-market mini-tender offers, having previously made offers to shareholders of well-known companies like SNC Lavalin, Manulife Financial, Gildan Activewear, Research In Motion (now BlackBerry) and others.

Many of these companies publicly asked their shareholders not to accept the mini-tender and advised shareholders to consider Canadian Securities Administrators’ warnings about the offer-type, which has been widely criticized.

Shareholders sometimes accept a below-market mini tender to avoid paying brokerage commissions for trading their shares and are therefore willing to accept a discount. However, a CSA advisory notes this is a very limited circumstance.

“These are bad news, I would say,” University of Calgary finance professor Ari Pandes said, calling mini-tender offers an “unscrupulous and unethical tactic.”

He said mini tenders often catch investors “off-guard” and cause them to “push the panic button so that some investors decide to sell.”

“The important thing is for the companies to get on top of it quickly,” Pandes said. He said companies should warn their shareholders not to accept the mini-tenders before retail investors, who might not do their homework, accept the offer.

Many mini-tenders do not have an out clause, Pandes said. That means once a mini-tender is accepted, depending on the fine print in the offer, the shareholder is locked into the deal.

Generally, he said the firm making the offer will then sell the shares on highly liquid public exchanges and pocket the difference between the two prices. Mini tenders are therefore an attempt to arbitrage the difference between an offer and the current share price.

Lorne Albaum, a Toronto securities lawyer who heads TRC Capital, did not respond to a request for comment.

Financial Post

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