Share acquisitions of Canadian public companies are usually structured as either a take-over bid or a court-approved plan of arrangement (which may involve an amalgamation, capital reorganization or share exchange).
A “take-over bid” is generally defined in securities law as an offer to acquire voting or equity securities of an issuer that is made to one or more persons, any of whom is in the legislating jurisdiction, if the securities subject to the offer, together with the securities held by the offeror, constitute in the aggregate 20% or more of the outstanding securities of that class at the date of the offer[[MI 62-104, s. 1.1; OSA, ss. 89(1).]].
In Canada, the term “take-over bid” refers to an offer made directly to the shareholders of the target, whether the offeror is offering cash, securities or a combination of both to the target shareholders (although sometimes a take-over bid that offers shares as consideration is referred to as a “share exchange take-over bid”). This differs from the terminology in the U.S. which generally refers to cash take-over bids as “tender offers,” and take-over bids in which shares are offered as consideration as “share exchange offers.” For the purpose of this discussion, a take-over bid refers to a take-over bid made by way of a take-over bid circular, not a bid which is exempt from the take-over bid rules.
In the U.S., the Office of Mergers and Acquisitions of the Securities and Exchange Commission (the “SEC”) reviews each tender offer for compliance with the rules. When securities are offered, the applicable industry group of the Division of Corporate Finance reviews the registration statement for the offered securities. In Canada, no securities commission is statutorily required to review a take-over bid circular prior to its mailing or upon its filing with the appropriate securities commission, regardless of the consideration offered.[[In practice, the staff of some securities commissions may review filed take-over bid circulars to ensure material compliance with the procedural and disclosure rules.]] As a result, there is no significant timing difference in Canada between the mailing of a take-over bid where cash is offered and one in which shares are offered. In addition, the period of time between the announcement of the transaction and the mailing of the take-over bid circular, particularly in the context of a hostile take-over bid, can be very short (i.e. within one or two days of receipt of the security holders list, which usually takes 10 days to obtain).
Advantages and Disadvantages
A take-over bid has certain advantages over a plan of arrangement and is generally the only alternative where the offer is unsolicited. The overall time frame to complete a take-over bid is shorter (35 days versus 60-plus days), although this shorter time frame may not be of significant assistance to the offeror if filings under the Competition Act[[R.S., 1985, c. C-34.]] (Canada) are required. A take-over bid is usually less costly than a plan of arrangement (unless the offeror is an insider of the target, which may require an independent valuation).
On the other hand, a take-over bid also has certain disadvantages. The first is the risk that less than 90% of the outstanding shares are tendered to the bid. If the offeror is able to acquire 90% or more of the outstanding shares of the target (other than shares held by the offeror at the commencement of the bid), then the balance of the shares may be acquired through a statutory compulsory acquisition process often referred to as a “squeeze-out” transaction. However, if the offeror is only successful in acquiring between 66.67% and 90% of the outstanding shares, then a second-stage transaction, such as a plan of arrangement or amalgamation, would need to be completed in order to obtain the balance of the shares of the target company.
The take-over bid rules are more restrictive than the requirements related to a plan of arrangement. They restrict the conferring of collateral benefits on security holders, which may become problematic where the offeror wants to enter into collateral agreements with senior management who are also shareholders. The take-over bid rules also strictly control purchases of the shares which are subject to the bid, prior to, during and after the bid. Due diligence is generally more difficult in a take-over bid, particularly in a hostile bid where the offeror will be limited to the public record. However, even in a friendly bid, representations and warranties are generally not provided by the target. Finally, where more than a nominal number of beneficial holders of securities reside in Quebec, the take-over bid circular must be translated into French, whereas a management proxy circular in respect of a plan of arrangement or amalgamation generally does not.
Commencing A Take-Over Bid
A take-over bid may be commenced by publishing an advertisement in the newspaper (in which case the date of the take-over bid is deemed to be the date of publication) or by sending the circular to the shareholders of the offeree company (in which case the date of the take-over bid is deemed to be the date of mailing). In either case, the bid must be open for at least 35 full days from the date of the bid.
Acquisitions Outside of the Bid
For various reasons, it may be advantageous for an offeror to secretly acquire shares of the target prior to the commencement of the bid. This practice is referred to as acquiring a “toe-hold” position. Securities legislation generally requires that, if the offeror acquires beneficial ownership of securities of the class that is subject to the bid within 90 days immediately preceding the offeror’s bid, then the bid must meet certain criteria. Specifically, the bid’s terms must be at least as favourable as the most favourable terms of any of those prior transactions, both in terms of the consideration offered and the percentage of the sellers’ securities of the class for which the offer is made. If the highest consideration in the prior transactions was not solely in the form of cash, the consideration in the bid must be in the same form as that highest consideration or at least its cash equivalent.
However, the foregoing pre-bid integration rules do not apply to trades effected in the normal course on a published market, so long as:
- 1. no broker acting for the purchaser or seller performs services beyond the customary brokerage function, or receives more than reasonable fees or commissions;
- 2. the purchaser, or any person or company acting for the purchaser, does not solicit or arrange for the solicitation of offers to sell securities of the class subject to the bid; and
- 3. the seller or any person or company acting for the seller does not solicit or arrange for the solicitation of offers to buy securities of the class subject to the bid.[[MI 62-104, s. 2.6; OSA, s. 93.2; and Ont. Rule 62-504, ss. 2.3(1).]]
Trades that are matched in the “upstairs” market and completed through the facilities of a recognized stock exchange, do not meet the requirement of “normal course” purchases under the pre-bid integration rules.
The pre-bid integration rules also do not apply to an acquisition of securities from the issuer of the securities, whether the securities previously had been unissued or acquired by the issuer.[[MI 62-104, ss. 2.4(2); OSA, ss. 93.2(3); and Ont. Rule 62-504, ss. 2.3(2).]]
No public disclosure of pre-bid purchases is required under Canadian law unless the total number of securities of any class (including securities convertible into that class of securities) held by the buyer, and any person acting jointly or in concert with the buyer, constitutes 10% or more of the outstanding securities of that class.[[MI 62-104, ss. 5.2(1); OSA, ss. 102.1(1); and Ont. Rule 62-504, s. 7.1.]] However, where the class of securities of the Canadian target issuer is registered under the U.S. Securities Exchange Act of 1934, the buyer will be required to report its acquisitions to the SEC within 10 days of acquiring more than 5% of the outstanding securities of that class.
Purchases During the Bid
From the day of the announcement of the offeror’s intention to make a formal take-over bid until the expiry of the bid, the offeror is prohibited from acquiring (or agreeing to acquire) beneficial ownership of securities of the target class, or securities convertible into securities of that class, other than under the bid itself,[[MI 62-104, ss. 2.2(1); and OSA, ss. 93.1(1).]] unless certain conditions are met. These conditions include, among others:
- 1. the intention to make such purchases is stated in the take-over bid circular, or, if the intention changes after the date of the bid, that intention is stated in a news release issued and filed with the securities regulators at least one business day prior to the purchases;
- 2. the number of securities acquired outside of the bid does not exceed 5% of the outstanding securities of the target class as at the date of the bid;
- 3. the purchases are normal course, non-pre-arranged transactions on a published market; and
- 4. the offeror issues and files a press release containing prescribed information after the close of business on each day securities are purchased.[[MI 62-104, ss. 2.2(3); OSA, ss. 93.1(5); and Ont. Rule 62-504, ss. 2.1(1).]]
The prohibition against acquisitions outside of the take-over bid does not apply to an agreement between a security holder and the offeror to the effect that the security holder will tender its securities to the take-over bid.[[MI 62-104, ss. 2.2(2); OSA, ss. 93.1(5); and Ont. Rule 62-504, ss. 2.1(2).]]
The insider trading provisions of securities legislation prohibit any person or company in a special relationship with a reporting issuer, from purchasing or selling securities of the reporting issuer with the knowledge of a material fact or material change with respect to the reporting issuer that has not been generally disclosed.[[OSA, ss. 76(1); ASA, ss. 207(1); BCSA, ss. 86(1); and QSA, ss. 187 and 188.]]
A person or company in a special relationship with a reporting issuer includes an insider, affiliate or associate of a person or company that is proposing:
- 2. to become a party to a reorganization, amalgamation, merger or arrangement, or similar business combination with the reporting issuer, or to acquire a substantial portion of its property.[[OSA, s. 76(3); ASA, ss. 9(a); BCSA, ss. 86(3); and QSA, s. 189.]]
Although it is difficult to precisely determine when a take-over bid is “proposed,” as a result of the above, it is generally recommended that no purchases of shares in the target be made by the officers or directors of the offeror from the time a take-over bid is being considered.
In Quebec, there is a real issue as to whether an offeror may acquire a toe-hold without making use of insider information. Given the desire of the AMF to maintain a certain degree of harmony with the legislative framework of the other provinces, it will generally not intervene if the parties have no significant connection to Quebec. If the parties have a significant connection to Quebec, it is recommended that the proposed acquisition of securities be first discussed with the AMF.
Request for List of Security Holders
Securities law requires that the take-over bid circular be sent to all holders of the class of securities subject to the bid, as well as all holders of securities that are convertible into securities of the class which are subject to the bid (e.g. options). In order to accomplish this, it is necessary for the offeror to obtain a list of security holders of the target. The Canada Business Corporations Act (“CBCA”),[[R.S., 1985, c. C-44.]] and Alberta’s Business Corporations Act (“ABCA”),[[R.S.A. 2000, c. B-9.]] require a corporation to provide such lists within 10 days after receipt of an affidavit[[CBCA, ss. 21(3).]] or statutory declaration,[[ABCA, ss. 23(5).]] respectively, containing the prescribed information. An offeror may be able to obtain the shareholders list in less time if the corporation is governed by British Columbia’s Business Corporations Act (“BCBCA”),[[(SBC 2002) Chapter 57.]] since such statute states the list is to be furnished “promptly,”[[BCBCA, ss. 49(4).]] or if the corporation was incorporated under Ontario’s Business Corporations Act (“OBCA”),[[R.S.O. 1990, Chapter B.16.]] which states that the list must be produced “as soon as is practicable.”[[OBCA, ss. 146(2).]]
The delivery of this request will sometimes be the first notice to the target of the proposed bid. The courts have stated that the form of the affidavit or statutory declaration must be in strict compliance with the applicable legislation in order to be effective.[[Dylex Ltd. v. Mark’s Work Wearhouse Ltd. (1997), 38 B.L.R. (2d) 52 Alta. (Q.B.).]] Accordingly, the contents of the affidavit or statutory declaration will be carefully reviewed by the target, and its counsel, to ensure compliance. If found to be defective, the affidavit or statutory declaration must be redelivered and the deadline to deliver the lists will start over.
More aggressive bidders have attempted to obtain the lists pursuant to the provisions of corporate law, which permit any person to examine the securities register upon payment of a reasonable fee and to make copies of those records.[[ABCA, ss. 23(4); CBCA, ss. 21(1); BCBCA, s. 46; and OBCA, s. 145. Under the CBCA (ss. 21(1.1)), and the BCBCA (s. 47), a person requesting such a list must provide an affidavit in the prescribed form.]] The issue is whether option holders are covered by this provision. In at least one case, an Alberta court has permitted the inspection of the records of the target, including the name and address of each holder of options, warrants, rights and securities convertible into common shares of the target.[[See the order of the Court of Queen’s Bench of Alberta dated May 25, 1999, in Samson Canada Ltd. v. Highridge Exploration Ltd. (unreported), Action Number 9901-07172 1999, in which the Court ordered compliance with ss. 21(4) of the ABCA, permitting the inspection of records of the target, including the name and address of each holder of options, warrants, rights and securities convertible into common shares of the target or any predecessor. No reasons for the decision were provided.]]
If there is no corporate statute that requires the target to provide a list of security holders to the bidder, as in the case where the target is an income trust, an offeror is still entitled to the list under securities legislation,[[MI 62-104, s. 3.4; and OSA, s. 99.1.]] which, under this circumstance, substantially adopts the requirements of the CBCA.
Prohibition Against Collateral Agreements
As a general rule, an offeror in a take-over bid, and the offeror’s joint actors, must not enter into an agreement or understanding that would have the effect of providing a security holder of the target with consideration of greater value than that offered to the other holders of the same class of securities (a “collateral benefit”).[[MI 62-104, s. 2.24; and OSA, ss. 97.1(i).]] However, there are exceptions for benefits that are received by security holders solely in connection with their services as an employee, director or consultant of the target or of the successor to the business of the target, if certain conditions set out in the legislation are met.[[MI 62-104, s. 2.25; OSA, ss. 97.1(2); and Ont. Rule 62-504, s.4.1.]] It may also be possible to obtain from the securities regulators a discretionary exemption from the collateral benefit prohibition on the basis that the benefit would be conferred for reasons other than to increase the value of the consideration paid for securities acquired in the take-over bid.[[MI 62-104, s. 6.2; and OSA, ss. 104(2)(a).]]
Inadequate Disclosure and Misrepresentation
Once an unsolicited bid has commenced, the target will often engage in a series of defensive tactics to try to give its board of directors more time to adequately pursue all available alternatives. These tactics include a review of all actions taken by the bidder to ensure compliance with applicable law, such as compliance with the pre-bid integration rules. In addition, the target’s corporate counsel will review the take-over bid circular for compliance with the disclosure requirements. Where the disclosure is found to be materially deficient, the target may make an application to the local securities regulatory authority to have the take-over bid cease traded. The commissions have entertained many applications based on allegations of non-compliance. Upon review of such decisions, it is clear that the deficiencies in the circular must be material. This position was clearly stated in Re Standard Broadcasting Corp. (1985), 8 OSCB 3672 at 3676-77:
As to the allegations of inadequate disclosure that were made and did surface at several points during the course of the hearing, none were, in our respectful opinion, material in the sense that the disclosure asked for would have been necessary to allow an investor to make an informed investment decision. We stress this last point, as it is often the case that allegations of non-disclosure or inadequate disclosure, are made during the course of a take-over bid. There is a difference between perfect disclosure (which no two opposing counsel likely would ever agree upon), acceptable disclosure and material non-disclosure or material misleading disclosure. In a case between these parties that was argued in the Supreme Court of Ontario before Madame Justice McKinlay after this Commission had denied relief, Madame Justice McKinlay noted that the appropriate standard of materiality is that set out in the judgment of the United States Supreme Court in TSC Industries, Inc. et al v. Northway Inc., 426 U.S. 438, 96 5. Ct. 2126 (1976), which standard was approved by Montgomery, J. in Royalty Trustco Ltd. et al. v. Campeau Corp. et al. (1980), 31 O.R. (2d) 75 at 101 and by the Ontario Court of Appeal in Sparling et al. v. Royal Trustco Ltd. et al. (1984), 45 O.R. (2d) 484 at 490. That standard is:
“…an omitted fact is material if there is substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote…[or in deciding whether the tender his shares in the case of a take-over bid]...”
No[t] one of the allegations of non-disclosure or inadequate disclosure met that standard of materiality. Although the TSC Industries standard of materiality often has been quoted and is well understood, it is frequently lost sight of when an allegation of non-disclosure is made before the Commission The fact that counsel for an applicant would have worded a matter differently, or would have made fuller disclosure, or would have placed emphasis on a different aspect of a matter, does not amount to non-disclosure unless there is a showing of materiality.
Even if the disclosure is found to be materially deficient, the securities commissions appear reluctant to cease trade an offer if the non-disclosure has been rectified through some other means. The most common means is through the directors’ circular. The board of directors of the target is required to send to all shareholders a directors’ circular within 15 days of the date of the bid. The statutory requirements of such circular impose upon the directors a statutory duty to rectify any deficiencies or material non-disclosure in a take-over bid circular. Accordingly, the commissions often take the position that any deficiencies in the take-over bid have been rectified by the directors’ circular. An example of this can be found in In the Matter of Rolland Inc. and Cascades Inc. (1987), 10 OSCB 1629 at 1636:
It must be noted, however, that Mr. Rolland’s decision not to tender and the necessary result that the 90% acceptance condition, unless waived, could not be met, were forcefully and prominently stated in the Rolland directors’ circular and, so stated and communicated, must be taken to be brought home to offerees. For that reason, and in all the circumstances of this case, we do not believe that Cascades’ failure to disclose material information in its take-over bid circular should, by itself, lead us to make the requested cease trade order.
This position was also supported in Canfor Corporation and Slocan Forest Products Ltd. (1995), 18 OSCB 475 at 481-2, where the OSC stated:
We have some doubt as to whether the correction of serious disclosure deficiencies in a take-over bid circular by appropriate disclosure in the directors’ circular would in all circumstances suffice to remedy the situation. However, in this case the Slocan directors did make appropriate disclosure in their circulars of the matters which we have found should have been, but were not, disclosed in the Canfor offering documents, and the deficiencies in the latter were, in our view, while material, not so significant as to demand and order correcting them in the circumstances. In addition, the directors of Slocan disclosed the omitted information in sufficient time to allow the Slocan shareholders to make a reasoned decision as to the desirability of accepting the Canfor bid.
The normal stated purposes of an SRP in Canada are to ensure that all shareholders are treated equally and to provide a period longer than 35 days for the board of the target to develop an alternative to maximize shareholder value. An SRP must be approved by a majority of the shareholders within six months of its adoption by the board of directors or the SRP is terminated.[[Toronto Stock Exchange Company Manual, s. 636(a); and TSX Venture Exchange Corporate Finance Manual, Policy 3.1, s. 12.3]] Prior to adopting an SRP, the issuer will often submit the draft plan to RiskMetrics Group. This organization focuses on corporate governance issues and will issue a voting recommendation on the SRP. Many Canadian institutional investors will vote against the SRP if RiskMetrics Group issues a negative recommendation.
SRPs would normally be triggered by a person becoming an “acquiring person,” which is generally defined as the beneficial owner of a specified percentage (usually 20%) of the outstanding voting securities of the company. A buyer can prevent the triggering of the SRP by making a “permitted bid,” which typically is a
bid that is open for a minimum period (usually 60 days), requires as a condition of the bid that a minimum
of 50% of the shares held by independent shareholders be deposited, and if the minimum is achieved, the bid be extended for at least 10 days to give the remaining shareholders an opportunity to accept the bid.
In 1997, a Manitoba court held that a bidder had triggered the target’s SRP when it entered into a lock-up agreement with a significant shareholder (under which the shareholder agreed to tender its shares to the proposed bid)[[United Grain Growers Ltd. v. 3339351 Canada Ltd. (1997) 32 B.L.R. (2d) 132]]. Since this decision, SRP’s have generally excluded a “permitted lock-up agreement” from the definition of “beneficially owned” shares, so that the execution of a lock-up agreement will not trigger the SRP.
In the U.S., a proxy contest is often an important part of the take-over battle, since obtaining control of the board may be essential in order to dismantle the poison pill. This is not the case in Canada, where it has been common practice for the offeror to make application to a securities commission to have the target’s SRP cease traded, resulting in numerous commission decisions on the subject.
The decision in Re Royal Host Real Estate Investment Trust and Canadian Hotel Income Properties Real Estate Investment Trust (1999), 22 OSCB 7819, is of particular significance since it was a decision of three of the major provincial securities commissions (British Columbia, Alberta and Ontario). In that case, the commissions attempted to reconcile various prior decisions. They indicated that there was no comprehensive and conclusive test that was required to be met. Instead, a commission must consider all of the relevant factors of the particular case when deciding whether or not to cease trade the SRP. The decision then went on to state at page 7828:
While it would be impossible to set out a list of all of the factors that might be relevant in cases of this kind, they frequently include:
In a significant shift in policy in 2007, the Alberta Securities Commission allowed an SRP, that was approved by the target’s shareholders during a hostile take-over bid, to remain in place and prevent the hostile bid from being completed.[[Re Pulse Data Inc., 2007 ABASC 895]] The Ontario Securities Commission made a similar decision in 2009.[[Re Neo Material Technologies Inc. and Pala Investments Holdings Limited (2009), 32 OSCB 6941]] However, in a subsequent decision, the British Columbia Securities Commission refused to depart from the historical position of the securities commissions that the only acceptable use of an SRP during a hostile take-over bid is to assist the target’s board in attempting to obtain an alternative transaction for shareholders.[[Re Icahn Partners LP and Lions Gate Entertainment Corp., 2010 BCSECCOM 233]]
As a result of these conflicting decisions, there is currently a discrepancy among Canadian securities regulators in the manner that they view poison pills. Accordingly, since a securities regulatory hearing on a poison pill normally takes place in the province or territory of the target’s head office, the target’s location could determine the outcome of the hearing. Nevertheless, it is clear at the present time in Canada that if there is no vote of shareholders approving a poison pill during the hostile take-over bid, the position of the regulators is that the poison pill will not be permitted to impede the bid indefinitely, regardless of where the target is located.[[For the Ontario Securities Commission, this was confirmed in Re Baffinland Iron Mines Corporations (2010) 33 OSCB 11385]]
The compulsory acquisition procedures generally state that, if within 120 days after the date of a take-over bid the bid is accepted by the holders of not less than 90% of the shares of the class to which the take-over bid relates (other than shares held at the date of the bid by or on behalf of the offeror or an affiliate or associate of the offeror), the offeror is entitled, on complying with the procedures set out in the applicable corporate legislation, to acquire the shares held by those holders who did not tender to the take-over bid.[[CBCA, ss. 206(2); ABCA, ss. 195(2); OBCA, ss. 188(1); BCBCA, s. 300; and QBCA, ss. 149(5)]] This right must generally be exercised within 60 days after the termination of the bid, and in any event, within 180 days after the date of the take-over bid (although the time limits are not identical in all the Canadian jurisdictions).[[CBCA, ss. 206(3); ABCA, ss. 196(1); OBCA, ss. 188(2); BCBCA, ss. 300(3) (the time limit under the BCBCA is within five months after making the bid); and QBCA, ss. 149(1)]] The amount paid for the remaining shares under these provisions will either be the same consideration that was paid for the shares purchased under the bid or, if the shareholder demands payment of the fair value of the shares, the amount as determined by the applicable court.
Second Step Transaction
When the offeror acquires less than 90% of the outstanding shares it did not hold prior to the commencement of the bid, the offeror will need to complete a subsequent acquisition transaction in order to acquire the remaining securities. A “going private” transaction is generally defined in corporate legislation as an amalgamation, arrangement, consolidation or other transaction in which a holder of a participating security (a security that carries a right to participate in the earnings of the issuer and, upon the liquidation or winding up of the issuer, in its assets) can be required, without the holder’s consent, to surrender the security, without the substitution of another participating security of equivalent value in the corporation or a successor to the corporation. However, a “business combination,” as defined in Multilateral Instrument 61-101 (“MI 61-101”), which is in force in Ontario and Quebec, is much broader than the historical definition found in the corporate legislation. In MI 61-101, a business combination is defined as:
A “related party” includes a person or company that beneficially owns or exercises control or direction over voting securities of the issuer carrying more than 10% of the voting rights attached to all outstanding voting securities of the issuer. As a result, any second step transaction by the offeror will be considered a business combination under MI 61-101.
MI 61-101 generally requires that a corporation proposing to carry out a business combination disclose the following in the information circular sent to shareholders:
- 1. every prior valuation in respect of the issuer which has been made in the 24 months before the date of the information circular and which was known to the issuer or any director or senior officer of the issuer; and
- 2. any bona fide prior offer which was received by the issuer during the 24 months before the transaction was agreed to.
Unless an exemption is available, MI 61-101 also requires the preparation of an independent valuation of the target company’s shares (and, subject to certain exceptions, any non-cash consideration being offered therefor). An exemption from this requirement applies if:
- 1. the business combination is being effected by the same buyer that made a take-over bid (or by an affiliate of that buyer) and is in respect of the same class of securities that were the subject of the bid;
- 2. the business combination is completed no later than 120 days after the date of expiry of the take-over bid;
- 3. the intent to effect a business combination was disclosed in the take-overbid circular;
- 4. the consideration per security paid in the business combination is at least equal in value and in the same form as the consideration that was paid in take-over bid; and
- 5. the take-over bid circular described certain tax consequences of both the take-over bid and the subsequent business combination.
MI 61-101 also requires that, in addition to any other required shareholder approval, the approval of the “minority” holders of the target shares be obtained at the meeting. Shares tendered to a take-over bid (including shares which were tendered pursuant to a lock-up agreement) may be voted by the offeror in the subsequent acquisition transaction, if, among other things, the above criteria are met and if the shareholder who tendered such shares was treated the same as all other shareholders (i.e. the per-share consideration received by the holder was identical in value and in form as received by the other holders, and the holder received no other consideration or collateral benefit for tendering such shares).
Additional posts from the blog
Last week the Canadian Government introduced amendments to the Investment Canada Act (ICA) to implement its revised policy towards state-owned enterprises (SOEs) which it announced in December last year. At that time, while it approved the acquisition by Chinese SOE, CNOOC, of Canadian oil and gas company, Nexen, the Government announced its intention to prohibit acquisitions of control of Canadian oil sands businesses by SOEs except on an exceptional basis. It also stated that joint ventures and minority investments were welcome. In addition, the government indicated it would closely monitor SOE acquisitions in other sectors of the economy and would distinguish between SOE and non-SOE investments when setting the ICA review threshold. (See Focus on Foreign Investment Review, December 2012)
The Autorité des marchés financiers Proposes An Alternative Approach to Securities Regulators Intervention in Defensive Tactics
On March 14, 2013, the Autorité des marchés financiers (“AMF”) published for comments a consultation paper (the “AMF Proposal”) pertaining to defensive tactics in response to take-over bids. This consultation is taking place concurrently with the one launched the same day by the Canadian Securities Administrator (“CSA”) with the release of proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). Unlike the CSA’s 62-105, the AMF Proposal addresses all defensive tacticsii, not only security holders rights plans.
The Canadian Securities Administrators published for comment a proposed new regulatory framework for rights plans under proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). If adopted, 62-105 would provide issuers with a game changing tool to respond to hostile take-over bids, where a target board will be able to use a rights plan as leverage to negotiate with a potential bidder.