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.… Continue Reading
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.… Continue Reading
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
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.
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.
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. 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
Shareholder activists are increasingly influential in Canada’s M&A landscape, but expect that trend to intensify with a proposal to list Pershing Square Holdings on the Euronext Amsterdam stock exchange. The listing is expected to complete Bill Ackman’s capitalization of the new $5 billion fund associated with Pershing Square Capital Management. The listing, which is likely to be complete by mid-October, will provide Mr. Ackman with the stable pool of capital he has long believed his investment strategy would benefit from.
In his 2014 Q2 letter to investors, Mr. Ackman expressed frustration that the Pershing Square group of funds must keep … Continue Reading
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
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
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
There are important lessons in a recent Ontario Court of Appeal decision examining shotgun buy-sell provisions, and in particular, the enforceability of a buy-sell offer that does not perfectly comply with the terms and conditions of the shotgun provision.
Unanimous shareholder agreements, partnership agreements, and joint venture agreements often contain what is commonly known as a “shotgun buy-sell provision”, which provides a mechanism for involuntarily expelling one or more parties from the business venture when the business relationship between them sours.… Continue Reading
There are important lessons in a recent Ontario Superior Court decision examining defensive tactics taken by a board in the context of a contested shareholders’ meeting.
In Concept Capital Management Ltd. v. Oremex Silver Inc., 2013 ONSC 7820, the board of Oremex – during a contested election — postponed a shareholders’ meeting and issued shares to a third party, GRIT, in a financing transaction that closed in escrow on the same date as the revised record date for the meeting. Oremex took the view that the new shares could be voted at the contested meeting.
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
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
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”, 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
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
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
In a recent ruling in Genesis Land Development Corp. v. Smoothwater Capital Corporation, the Court of Queen’s Bench of Alberta found that a dissident shareholder breached its obligations under securities law when it failed to properly disclose, in an early warning report, that it was acting “jointly or in concert” with other dissident shareholders to gain control of the Genesis board of directors. In its finding, the Court confirmed that, for purposes of disclosure under the early warning reporting system, the concept of acting “jointly or in concert” is relevant not only to take-over bids, but it is also … Continue Reading
On August 7, 2013, a panel of Commissioners of the British Columbia Securities Commission released its decision to dismiss allegations that (i) a Vancouver-based TSX Venture Exchange listed mining company, Canaco Resources Inc. (Canaco), its CEO and President and three of its directors had breached securities laws by not immediately press releasing new infill drill results and issuing a material change report; and (ii) … Continue Reading
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
Recently, in Proton Energy Group SA v. Public Company Orlen Lietuva,  EWHC 334 (Comm), the English High Court found in a preliminary motion that it was “plausible” that an email with the word “confirmed” was sufficient to constitute the acceptance of an offer even though several terms remained subject to further negotiations.… Continue Reading
In a recent bench ruling in Re Plains Exploration, the Delaware Court held that a special committee was not required to take the lead in merger negotiations in circumstances where almost all of the members of the board were independent and free from conflict in connection with the transaction.
In Re Plains Exploration, the Delaware Court denied the plaintiff shareholders’ request to enjoin a merger between Plains Exploration & Production Company and Freeport-McMoRan Copper & Gold even though the Plains’ board (a) did not shop Plains before agreeing to merge with Freeport, (b) did not conduct a “pre” and … Continue Reading
Your company is contemplating a potential transaction and you would like to share your project with one or more major shareholders before any public announcement in order to maintain good relations with them and validate whether they would be supportive of the potential transaction. Senior executives of Canadian public companies often wonder to what extent information can be shared with major shareholders in such context.
Is such transaction material for your company?
Securities legislation in Canada prohibits a public company from informing, other than in the necessary course of business, anyone of any material information before such information has … Continue Reading