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Category Archives: Public M&A

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

Posted in Public M&A, Shareholders, Strategy

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 … Continue Reading

Mini-Tenders 201: Responding to Mini-Tender Offers

Posted in Public M&A, Shareholders, Strategy

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

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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Early Warning Reporting Threshold Remains at 10% While Other Changes to Enhance Transparency Will Be Implemented

Posted in Public M&A, Shareholders, Strategy

On October 10, 2014, the Canadian Securities Administrators (CSA) provided an update on the status of proposed amendments to Canada’s early warning reporting (EWR) system first published in March 2013.[1]  After extensive public consultation, the CSA announced that they will proceed with the amendments except for two important proposals: to reduce the reporting threshold from 10% to 5% and to include “equity equivalent derivatives” for the purposes of determining the threshold for EWR disclosure.  The CSA intends to publish final amendments to the EWR system and related guidance in the second quarter of 2015, subject to the receipt of … Continue Reading

CETA Will Create a Two-Tiered System for Investment Canada Act Reviews

Posted in Private Transactions, Public M&A, Strategy

The text of the Canada and European Union (EU) Comprehensive Economic and Trade Agreement (CETA) is due to be released soon, but it remains to be seen if the Canadian government will clarify which countries, in addition to those in the EU, will benefit from the higher $1.5-billion threshold for review under the Investment Canada Act (ICA).

On October 29, 2013, the Canadian government released the Technical Summary of Final Negotiated Outcomes of CETA, in which it indicated that the ICA threshold would be raised to $1.5 billion for EU investors and that investors from Canada’s other free trade agreement … Continue Reading

Proposed Changes to Takeover Bid Regime in Canada Would Put More Time in the Hands of Target Boards

Posted in Public M&A, Shareholders, Strategy

On September 11, 2014, the Canadian Securities Administrators (CSA) published CSA Notice 62-306 – Update on Proposed National Instrument 62-105 Security Holder Rights Plans (Notice) and the Autorité des marchés financiers (AMF) Consultation Paper An Alternative Approach to Securities Regulators’ Intervention in Defensive Tactics. The notice indicates that the CSA intend to publish for comment a new harmonized proposal based on amendments to the takeover bid regime which will aim to facilitate the ability of shareholders to make voluntary, informed and coordinated tender decisions and provide target boards with additional time to respond to hostile bids, with the objective … Continue Reading

More on “Golden Leash” Arrangements

Institutional investor organization urges SEC to require disclosure

Posted in Public M&A, Shareholders, Strategy

The debate about so-called “golden leash” arrangements has picked up again. The Council of Institutional Investors (“CII”), an influential association of institutional investors, recently wrote a letter to the U.S. Securities and Exchange Commission (“SEC”) expressing its concerns regarding the transparency of compensation paid in “golden leash” arrangements.

As discussed in our previous post, “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 a target corporation. In January, 2014, Institutional Shareholder Services Inc. provided its views on by-laws designed to prohibit “golden leash” … Continue Reading

Augusta/HudBay – A model for target boards to say “not now”?

Posted in Public M&A, Shareholders, Strategy

The recent outcome of the Augusta/HudBay poison pill hearing provides some insight into how a shareholder rights plan may withstand scrutiny from a Canadian securities regulator for an extended period of time in the right circumstances. Though perhaps the result of somewhat unique facts, including insufficient initial support for the price being offered by the bidder and an active process being conducted by the target company, the British Columbia Securities Commission’s decision in Augusta/HudBay is also of interest in the context of the ongoing debates sparked by the proposed National Instrument 62-105 on Security Holder Rights Plans.… Continue Reading

Don’t “put” yourself at risk

Beware of the use of put and call options

Posted in Public M&A

Canadian securities legislation provides that a take-over bid may be triggered when an offer to acquire outstanding voting or equity securities of a class of a public company is made to a person in a Canadian jurisdiction, where the securities subject to the offer, together with the offeror’s own securities, constitute in the aggregate 20% or more of the outstanding securities of that class. The take-over bid rules may apply in the context of the grant of put and call options. It is therefore essential to structure the terms of these options to ensure the availability of take-over bid exemptions … Continue Reading

New 2014 Competition Act Merger Notification Threshold

Posted in Private Equity, Private Transactions, Public M&A

The pre-merger notification transaction-size threshold for 2014 has increased to $82 million from the 2013 threshold of $80 million. 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 … Continue Reading

By-laws counteracting “Golden Leash” arrangements: ISS speaks

Posted in Public M&A, Shareholders, Strategy

On January 13, 2014, Institutional Shareholder Services Inc. (“ISS”) issued FAQs explaining its views on by-laws designed to prohibit so-called “Golden Leash” arrangements. As discussed in our post last month, such 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.

ISS’ view is that, absent a shareholder vote, a by-law precluding a nominee director from being compensated by a third party “may be considered a material failure of governance”. Consequently, in such circumstances, ISS may “recommend a vote against or withhold from … Continue Reading

New 2014 Investment Canada Act WTO Review Threshold

Posted in Contractual Matters, Private Equity, Private Transactions, Public M&A, Shareholders, Strategy

Industry Canada has announced that the Investment Canada Act (Act) threshold for 2014 that applies to most direct acquisitions of Canadian businesses by non-Canadian investors from World Trade Organization (WTO) member countries is $354 million (an increase from last year’s $344 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 lower threshold of $5 million continues to apply to direct investments that relate to cultural businesses or where none of the non-Canadian parties comes from a … Continue Reading

A Guide to Canadian M&A in the Second Half of 2013

Posted in Awards and Recognitions, Contractual Matters, Private Equity, Private Transactions, Public M&A, Shareholders, Strategy

In July, we published a blog post on the Canadian M&A landscape in the first half of 2013.  As 2013 has now come to an end, it seems appropriate to recap what happened in the second half of 2013.  McCarthy Tétrault advised on seven of Lexpert’s top ten deals of 2013, published in the January issue of Lexpert.  Below, we’ve highlighted some of the major trends and deals that transpired during Q3 and Q4 of 2013.

Second Half Sees Fewer but Larger Deals

Canadian companies were involved in 2,325 announced deals valued at $158.2 billion in 2013, down Continue Reading

“Golden Leashes”

The Controversy from this Proxy Season

Posted in Public M&A, Shareholders, Strategy

“Golden Leashes”, and by-laws designed to counteract such arrangements, have provoked significant controversy in the 2013 proxy season, and regulators, proxy advisors, and institutional shareholders have yet to take a definitive position in the debate. This post reviews what will certainly continue to be a hot button topic in 2014.… Continue Reading

TSX Proposes to Loosen Shareholder Approval Requirements for New Security-Based Compensation Arrangements in M&A Transactions

Posted in Public M&A, Shareholders, Strategy

On November 28, 2013, the Toronto Stock Exchange published proposed amendments to the TSX Company Manual that would permit a listed issuer to adopt new security-based compensation arrangements for employees of a target company in the context of an M&A transaction without the need to obtain shareholder approval provided that certain conditions are met.

The TSX Company Manual provides that a listed issuer must obtain shareholder approval to adopt a security-based compensation arrangement unless the arrangement is provided as an inducement for employment to an officer of the listed issuer or the listed issuer assumes the compensation arrangement of a … Continue Reading

DON’T ASK, DON’T TELL?

Lessons from the SEC’s recent “ring fencing” settlement with Revlon

Posted in Private Equity, Private Transactions, Public M&A, Shareholders

The recent settlement in the United States between the Securities and Exchange Commission (SEC) and Revlon highlights the importance of not appearing to obstruct the flow of material information to shareholders.

The SEC settled charges that Revlon misled shareholders during a going private transaction. The SEC’s order found that to avoid a potential disclosure obligation, Revlon engaged in “ring fencing” to avoid knowing that the transaction’s consideration had been deemed inadequate by a third party’s financial advisor.… Continue Reading

Dealmaking in the Beauty and Personal Care Space

Highlights from the Recent Mergermarket Report, Buying Into Beauty

Posted in Contractual Matters, Private Equity, Private Transactions, Public M&A

Check out our new post published on our Retail Consumer and Advisor Blog on Buying Into Beauty, the recent Mergermarket report prepared in association with Michel Dyens & Co. In addition to highlighting some of what we think are the key themes coming out of that report for the retail and consumer products audience in particular, our post also summarizes some of what we think are the key takeaways on M&A activity in the beauty and personal care industry more generally.

Of course there is plenty more exciting news on M&A activity in this space, which you can read about … Continue Reading

Should a Seller Care About Due Diligence?

Yes. And here are a few MORE reasons why.

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

In our recent post we considered, to what extent, the seller in the context of an M&A transaction should care about legal due diligence, and suggested that there are a number of important reasons why a seller should concern itself with legal due diligence in the face of an acquisition.

In addition to our thoughts on the utility of seller due diligence for the purpose of uncovering potential barriers to the sale of the target business, the seller will also want to ensure that it can actually make the representations and warranties that it has been asked to make in … Continue Reading

Should a Seller Care About Due Diligence?

Yes. And here’s a few reasons why.

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

Legal due diligence is typically a key part of an acquisition, but historically the focus has been on diligence from the perspective of the buyer, and less frequently from the perspective of the seller. Of course, this is natural given it’s the buyer who will want to uncover everything it can about the business it plans to acquire before a definitive agreement is entered into. But does this mean that sellers shouldn’t also care about legal due diligence?

There are a number of important reasons why a seller should concern itself with legal due diligence in the face of a … Continue Reading

Let me bridge the Gap

Contingent Value Rights as a tool in structuring M&A transactions

Posted in Public M&A

In M&A transactions, the determination of the value of a target company may sometimes give rise to a debate.  For example, typical valuation methods may have their limits when it comes to the potential of undeveloped or early-stage assets.  The difficulty in predicting the outcome of contingent events (e.g. major litigation involving the target), may also have a material impact on valuation.  Contingent Value Rights (CVRs) may be a useful tool to bridge the valuation gap between the buyer and the target while, in certain cases, preserving potential future value of certain assets for the target’s shareholders.… Continue Reading

Insider Trading in the Context of M&A Activity Part 2

Key Takeaways from the Lambert Settlement

Posted in Public M&A

A few days ago we told you about the recent settlement agreement between Anthony Lambert and the Alberta Securities Commission. If you missed that post, you can check it out here for background or read on for our key takeaways on insider trading in the M&A context from the Lambert settlement and other recent decisions by Canadian securities commissions.

Insider Trading in the M&A Context

The timing of public disclosure of a potential M&A transaction has always been a tricky issue, with issuers often giving careful consideration as to the appropriate point at which there is sufficient certainty about a … Continue Reading

Insider Trading in the Context of M&A Activity Part 1

The Lambert Settlement, a Cautionary Tale

Posted in Public M&A

A recent settlement agreement between Anthony Lambert (“Lambert”) and the Alberta Securities Commission (“ASC”) presents a cautionary tale for directors and officers of public companies who are considering trading in securities during the early stages of M&A activity. We’ll discuss some of the key takeaways from this cautionary tale in our next post, but for now, here’s an overview of the Lambert settlement.

The ASC alleged that Lambert, then President and CEO of Daylight Energy Ltd. (“Daylight”), breached Alberta’s securities laws and acted contrary to the public interest by purchasing Daylight’s securities with knowledge … Continue Reading

Are you meeting expectations? A Case for Benchmarking

A Canadian perspective on the interpretation and use of benchmarking in an efforts clause

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

The authors of a recent US article appearing in Corporate Counsel explored how efforts clauses – that is, contractual provisions that require one party to a contract to exercise some standard of effort to maximize the benefits to be received by the other party to the contract – may be improved. Their hypothesis is simple: parties often expend far too much time negotiating over the adjectives “reasonable” or “best” and far too little time drafting benchmarks into the agreement as an objective measure of how efforts are to be applied. Their conclusion is that open-ended benchmarking assists in ensuring parties … Continue Reading

A Guide to Canadian M&A in the First Half of 2013

Recovery Hits Roadblock: 2013 sees decline in Canadian and Global deal volume and value

Posted in Contractual Matters, Private Equity, Private Transactions, Public M&A, Shareholders, Strategy

As we move into the second half of 2013, it seems appropriate to look back at what has gone on so far this year across the Canadian M&A landscape. Below we’ve highlighted some of the major news items and deals that have taken place so far.

First Half Sees Fewer and Smaller Deals. The first quarter of 2013 ended with the fewest number of Canadian M&A transactions in a particular quarter since Q1 2011. By value, it was the quietest quarter in three years. A first quarter Mergermarket report found an 11.4% reduction in deal volume (124 announced transactions) and … Continue Reading