Canadian M&A Perspectives

Private and Public Mergers & Acquisitions | Private Equity

Good Faith, Honest Performance and M&A: Top 5 Takeaways Stemming from Bhasin v. Hrynew

Exploring the impact on Canadian mergers and acquisitions of the Supreme Court of Canada’s recent recognition of a new common law duty of honest performance

Posted in Contractual Matters, Private Transactions, Public M&A, Strategy
Heidi Gordon

There’s been a lot of buzz surrounding the Supreme Court of Canada’s recent precedent-setting judgement, Bhasin v. Hrynew, 2014 SCC 71, in which the Court recognized, for the first time, a new common law duty that applies to the performance of contracts throughout Canada. The new common law duty is a duty of honest performance, and is a manifestation of the general organizing principle of good faith. The implication is that parties must perform their contractual duties honestly and reasonably, and that they must have appropriate regard to the legitimate contractual interests of the other parties to the contract. For an overview of the Bhasin decision, click here.

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New 2015 Competition Act Merger Notification Threshold

Posted in Private Equity, Private Transactions, Public M&A
Oliver J. BorgersMichele Siu

The Competition Bureau has announced that the pre-merger notification transaction-size threshold for 2015 will increase to $86 million from the 2014 threshold of $82 million.  The 2015 threshold will come into effect immediately following publication in the Canada Gazette Part 1 (anticipated to occur on February 7, 2015).  As per the indexing mechanism set out in the Competition Act (Act), the pre-merger notification threshold is reviewed annually.

The threshold is based on the book value of assets in Canada of the target (or in the case of an asset purchase, of the assets in Canada being acquired), or the gross revenues from sales “in or from” Canada generated by those assets, calculated in accordance with the Notifiable Transactions Regulations under the Act. The Competition Bureau must generally be given advance notice of proposed transactions when the acquired assets in Canada or revenues generated in or from Canada from such assets exceed $86 million, and when the combined Canadian assets or revenues in, from or into Canada of the parties together with their respective affiliates exceed $400 million.   This amount has not been reviewed and remains the same as in 2014.

5 Corporate Governance Tips to Reduce Risk in the M&A Process

Posted in Private Transactions, Public M&A, Shareholders, Strategy
Nathan Montgomery

Because of the growing risk of litigation by unhappy (or simply opportunistic) shareholders following the sale or acquisition of a company, corporate governance practices during the M&A process face increasing scrutiny.

In a recent article titled “Documenting the Deal: How Quality Control and Candor Can Improve Boardroom Decision-making And Reduce The Litigation Target Zone”, forthcoming in The Business Lawyer, Leo Strine, Chief Justice of the Delaware Supreme Court, sets forth some best practices for directors and legal and financial advisors “to conduct an M&A process in a manner that: i) promotes making better decisions; ii) reduces conflicts of interests and addresses those that exist more effectively; iii) accurately records what happened so that advisors and their clients will be able to recount events in approximately the same way; and iv) as a result reduces the target zone for plaintiffs’ lawyers”.

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New 2015 Investment Canada Act WTO Review Threshold

Posted in Contractual Matters, Private Equity, Private Transactions, Public M&A, Shareholders, Strategy
Oliver J. BorgersIan C. MichaelLeslie Milroy

Industry Canada has announced that the 2015 Investment Canada Act (“Act”) threshold that applies to most direct acquisitions of Canadian businesses by non-Canadians will be C$369 million.  This is an increase from last year’s $354 million threshold. The threshold applies to the gross book value of the target’s assets. Note that under the Act, a non-Canadian includes a Canadian-incorporated entity that is ultimately controlled outside of Canada.

The existing lower threshold of C$5 million will continue to apply to transactions that relate to cultural businesses or where none of the parties are from a country that is a WTO member. Continue Reading

The 2015 Proxy Season: Glass Lewis and ISS Canadian Proxy Voting Guidelines Updates

Posted in Public M&A, Shareholders, Strategy
Rene SorellJonathan GrantIan C. MichaelMatthew CummingMatthew Griffin

With the 2015 Proxy Season close at hand, Glass, Lewis & Co., LLC (Glass Lewis) and Institutional Shareholder Services Inc. (ISS) recently released their updated Canadian proxy voting guidelines. Changes and clarifications have been made to their guidelines in such areas as advance notice policies and by-laws, shareholder rights plans and majority voting.

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Mini-Tenders 301: Will Such Offers Be Used in Proxy Contests?

Posted in Public M&A, Shareholders, Strategy
Matthew CummingShane C. D'SouzaMatthew Griffin

This is the final article in our mini-tender trilogy. We have previously discussed mini-tender offers from the perspectives of the offeror, and the issuer and shareholders. This article considers how mini-tenders might be strategically used in proxy contests.

As shareholder activism rises, the activists’ toolkit keeps evolving. The strategic use of a mini-tender offer in a recent proxy contest suggests that such offers may increasingly be considered as a means of influencing the outcome of proxy contests.

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“Golden Leashes” are back: Will shareholder activists win this round?

Posted in Public M&A, Shareholders, Strategy
Shane C. D'SouzaDeandra Schubert

After taking a break this past proxy season, “golden leash” arrangements are back in the spotlight. A few days ago, Third Point LLC proposed so-called “golden leash” arrangements for their two nominees to the board of Dow Chemical Co.

“Golden leash” arrangements arise when a shareholder activist privately offers to compensate its nominee directors in connection with such nominees’ service as a director of the target corporation. Arrangements vary but include compensating activist directors who are elected based on achieving benchmarks, such as an increase in share price over a fixed term. Shareholder activists only provide such incentives to elected activist directors, not re-elected incumbent directors. See our prior articles for more background, ISS’s position, and the Council of Institutional Investors’ position.

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SCC Delivers Ground-Breaking Decision in Canadian Contract Law

Posted in Uncategorized

The following Canadian Appeals Monitor blog post by Brandon Kain and Neil Finkelstein may be of interest to readers of this blog:

SCC Delivers Ground-Breaking Decision in Canadian Contract Law

The Supreme Court of Canada has released a precedent-setting judgment in which it recognized, for the first time, that there is a general organizing principle of good faith in the performance of contracts throughout Canada: Bhasin v. Hrynew, 2014 SCC 71.  The Bhasin case, which was successfully argued by Neil Finkelstein and Brandon Kain of McCarthy Tétrault’s Toronto litigation group, will be very important for Canadian businesses going forward.  As a result of Bhasin, all contracts throughout Canada are now subject to a duty of, at a bare minimum, honest performance, which cannot be excluded by the terms of an agreement.  Read More.

Mini-Tenders 201: Responding to Mini-Tender Offers

Posted in Public M&A, Shareholders, Strategy
Matthew CummingShane C. D'SouzaMatthew Griffin

In our previous article, we introduced mini-tenders and discussed the factors that should be considered before launching a mini-tender offer. As a refresher, a mini-tender is an offer to purchase securities below the threshold that triggers regulatory rules for take-over bids. Such an offer is not specifically regulated and can be used to acquire small but not insignificant positions in public companies, often at a discount to the prevailing market price.

In this article, we discuss mini-tenders from the perspective of issuers and shareholders.

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Mini-Tenders 101: Factors to Consider Before Launching a Mini-Tender Offer

Posted in Public M&A, Shareholders, Strategy
Matthew CummingShane C. D'SouzaMatthew Griffin

Mini-tenders have a bad reputation, which may explain why they are used infrequently. This is the first in a trilogy of articles about mini-tender offers from the perspectives of offerors, issuers and shareholders. It reviews factors that an offeror should consider before launching a mini-tender offer.

A mini-tender is simply an offer to purchase securities below the threshold that triggers regulatory rules for take-over bids. Such an offer is not specifically regulated and can be used to acquire small but not insignificant positions in public companies, often at a discount to the prevailing market price.

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