New take-over bid regime

The Canadian Securities Administrators (the CSA) recently adopted amendments to the take-over bid regime (the Bid Amendments). Except in Ontario, provided all necessary approvals are obtained, the Bid Amendments and Early Warning Amendments will come into force on May 9, 2016. In Ontario, these will come into force on the later of: (a) May 9, 2016, or (b) the day on which certain sections of Schedule 18 of the Budget Measures Act, 2015 (Ontario) are proclaimed into force.

The Bid Amendments are designed to enhance the quality and integrity of the take-over bid regime and rebalance the current dynamics among offerors, offeree issuer boards of directors (offeree boards), and offeree issuer security holders by: (i) facilitating the ability of offeree issuer security holders to make voluntary, informed and co-ordinated tender decisions; and (ii) providing the offeree board with additional time and discretion when responding to a take-over bid.

Specifically, the Bid Amendments will require that all non-exempt take-over bids:

  1. receive tenders of more than 50% of the outstanding securities of the class that are subject to the bid, excluding securities beneficially owned, or over which control or direction is exercised, by the offeror or by any person acting jointly or in concert with the offeror;
  2. be extended by the offeror for an additional 10 days after the Minimum Tender Requirement has been achieved and all other terms and conditions of the bid have been complied with or waived; and
  3. remain open for a minimum deposit period of 105 days unless:
    • the offeree board states in a news release a shorter deposit period for the bid of not less than 35 days, in which case all contemporaneous take-over bids must remain open for at least the stated shorter deposit period; or
    • the issuer issues a news release that it intends to effect, pursuant to an agreement or otherwise, a specified alternative transaction, in which case all contemporaneous take-over bids must remain open for a deposit period of at least 35 days.

The Bid Amendments involve fundamental changes to the bid regime to establish a majority acceptance standard for all non-exempt take-over bids, a mandatory extension period to alleviate offeree security holder coercion concerns, and a 105-day minimum deposit period to address concerns that offeree boards do not have enough time to respond to an unsolicited take-over bid.

The foregoing is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, please contact the author who would be pleased to discuss the issues above with you, in the context of your particular circumstances.