The founder of extruded building products giant Royal Group Technologies Ltd. has agreed to loosen his ties to the company even further.
Vic De Zen plans to convert his multiple-voting shares to an equal number of single-vote shares in Royal Group, the firm said March 24. De Zen, who now holds shares worth about 80 percent of shareholder votes, will see his voting stake in the Woodbridge-based company drop to 17 percent, equal to his equity stake.
He also agreed to resign from Royal Group's board of directors when shareholders approve the conversion of his shares, probably at the company's May 25 annual meeting. He has signed a three-year noncompete covenant starting Dec. 18, 2003, when he resigned as the firm's chief executive officer.
De Zen, former Chief Financial Officer Ron Goegan and former CEO Douglas Dunsmuir were fired in November over a 1998 land sale to Royal Group in which the executives profited. Dunsmuir also resigned from the board in December and Royal announced Goegan's resignation March 11.
Royal Group said De Zen also agreed to pay back the C$6.5 million (US$5.3 million) profit he and his partners made when they sold the land in Vaughan to Royal Group for C$27 million (US$22.2 million). De Zen also will pay C$2.2 million (US$1.8 million) in interest.
Company officials said in a March 24 conference call that De Zen will not pay cash for the land deal. Instead, he and Royal Group agreed to the payment through offsets such as De Zen agreeing not to push for severance payment from the company, and the conversion of his multiple-vote shares to single-vote shares on a one-to-one basis without a customary per-share premium. Separately, he agreed to repay C$1.13 million (US$929,000) in bonuses received for 2002.
The agreements with De Zen resulted from findings by forensic accounting firm Kroll Lindquist Avey. Kroll looked at 12 other related-party real estate transactions and found they were fairly valued. As well, it saw no need for action on other related-party acquisitions and divestitures. Kroll did express concern about bonus practices from 1996-2003, and Royal Group said it is revamping its bonus plans.
Interim President and CEO James Sardo said Royal Group is pleased that the firm has resolved all outstanding issues with De Zen. He later told reporters in another conference call that Royal Group will miss De Zen's vision and passion, which helped build the business he founded in 1970.
``In negotiating this agreement with Mr. De Zen, the special committee recognized his achievement in building one of Canada's leading industrial companies from scratch,'' Sardo said in a news release. ``We did not want to lose sight of his achievement, while also arriving at an agreement that had to be reasonable and fair to the shareholders of the company. I believe we have accomplished this.''
Royal Group CFO Robert Lamoureux told analysts the company is close to choosing a new president and CEO. It has narrowed the field to three candidates with experience in North American building products and it expects to announce its decision in April. Royal Group also expects to appoint five new independent directors to its board and to choose a new CFO before the May 25 annual meeting.
Royal Group reported sales of C$420.1 million (US$345.3 million) for its fourth quarter, ended Dec. 31, up 1.4 percent from a year earlier. It lost C$36.2 million (US$29.8 million) in the latest period compared with net profit of C$3.7 million (US$3 million) a year before. It blamed the loss largely on high raw material costs, a rise in the Canadian dollar, an unfavorable product mix and write-down of a money-losing operation in Mexico.