JANET MCFARLAND

Globe and Mail Update

Posted on Monday, June 27, 2011 11:43AM EDT

A proxy battle to replace the board of junior mining company Ursa Major Minerals Inc. has taken an unusual twist after dissident shareholders complained that a prominent proxy solicitor working for Ursa Major bought a big chunk of the company’s shares himself to help sway the vote in favour of his client.

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But Wes Hall, chief executive officer of Kingsdale Shareholder Services Inc., says he bought 8.4 per cent of Ursa Major’s shares on June 16 to bolster an investment position in the company that he previously bought earlier this year -- and not to swing last week’s vote.

The unusual proxy battle saw investment firm Forbes & Manhattan Inc. team up with junior miner Inspiration Mining Corp. in a bid to oust the board of Ursa Major and replace the directors with their own dissident slate.

Ursa Major hired Mr. Hall’s Kingsdale as its proxy solicitor in the battle, which means his firm was hired to help sell the company’s side of the story and gather votes from shareholders in support of the company’s slate of directors.

In an unusual move, Mr. Hall issued a news release June 16 announcing his private investment firm -- 1599597 Ontario Inc. or “HallCo” -- had acquired 6.64 million shares of Ursa Major representing 8.4 per cent of the company’s shares. The purchase price was $1.7-million.

Forbes and Inspiration, who lost the proxy vote battle last week, issued a press release Thursday complaining about Mr. Hall’s purchase, and arguing he bought the shares to secure the election of Ursa Major’s nominees.

“HallCo and its related parties, Kingsdale and Mr. Hall, have exceeded the customary role of a proxy solicitation agent, and must in these circumstances be found to be acting jointly or in concert with Ursa Major management and its director nominees,” the firms argued in their release.

They said Mr. Hall’s shares should not have been counted in the final vote tally as a result.

In an interview, Mr. Hall acknowledged it is unusual for a proxy solicitor to buy the company’s shares, saying he has never done it before in a long career working with many of Canada’s largest companies on contested voting matters.

He said he bought the shares in mid-June, taking advantage of an unexpected opportunity to buy when another shareholder had decided to put his stake up for sale.

“I have an investment company,” Mr. Hall said. “I said of course I’d be interested.”

He already owned 6.3 per cent of the company, which he acquired in a financing earlier this year, and the new purchase brought his total stake to 14.7 per cent.

Mr. Hall said he would not have bought the shares simply to sway the vote, noting his $60,000 fee as a proxy solicitor wasn’t worth spending $1.7-million to acquire shares. His fee did not include a “success fee,” he added, which means he did not personally stand to earn more if the vote passed.

Ursa Major issued a release Friday saying its director nominees had received “overwhelming” support, but did not disclose the detailed vote tally.

The complaint about Mr. Hall’s investment comes at the end of a long and bitter battle over Ursa Major that has seen Forbes and Inspiration clash in public and in several court hearings already this year.

The company said in the release it has “been plagued by a group of opportunistic dissident shareholders,” who have “repeatedly attempted to hijack the company for the own ends.” The two investors are being advised by Northern Shareholder Services, run by dissident investor Vic Alboini, who was also a proposed director nominee on the dissident slate.

The dissident investors filed a new court challenge last week to try to have Mr. Hall’s votes rejected in the deal. But the application was withdrawn before the hearing was held last Wednesday.

Mr. Hall said he does not believe the purchase was a conflict of interest because his client -- Ursa Major -- was well aware of his ownership stake, it was clear to other investors that he was acting for Ursa Major in his role as a proxy solicitor, and he publicly disclosed the purchase immediately after he bought the shares in June.

As to whether the unusual purchase could set a dangerous precedent with future clients expecting a similar investment to help win their contested votes, Mr. Hall said he has no intention of investing large sums of his family investment company’s money in other companies just to secure proxy solicitation work.

“At the end of the day you’re not going to make a stupid decision,” he said.