Catalyst rights plan riles largest shareholder

VANCOUVER -- Catalyst Paper Corp.'s largest shareholder, Third Avenue Management LLC, is irked by the Vancouver pulp and newsprint company's decision to respond to its $129-million tender offer by adopting a shareholders rights plan.

"They had better have a good reason for doing this," said Amit Wadhwaney, a portfolio manager at Third Avenue, which launched the offer two weeks ago, saying it wants to double its stake in Catalyst to 38 per cent. He said Third Avenue is weighing its options, including filing a complaint with the Ontario Securities Commission in a bid to have the rights plan struck down.

New York-based Third launched a tender offer on July 26, bidding $3.30 each for up to 39 million shares of Catalyst. The stock rose 5 cents to $3.25 yesterday on the Toronto Stock Exchange.

In a statement released yesterday, Catalyst defended its decision to adopt the rights plan -- or poison pill -- saying the move would provide the time needed to assess the unsolicited offer by Third Avenue.

Catalyst said its board of directors has formed a special committee to review the tender offer and make recommendations to shareholders. The committee has hired CIBC World Markets Inc. and UBS Warburg to assist with the review.

"Until we are in a position to provide more informed views to our shareholders about Third Avenue's bid, we are advising that shareholders take no action in respect to the offer," said special committee chairman Tom Chambers.

The rights plan, which has a duration of 180 days, is subject to the approval of the TSX, Catalyst said.

Mr. Wadhwaney said the poison pill, while in effect, will prevent shareholders from taking advantage of the tender offer. "All this does is entrench management."