CHAPTER 05 Public Mergers & Acquisitions
In a negotiated (or friendly) scenario, an acquisition of a Canadian public company may be completed by way of a “supported” takeover bid, a plan of arrangement or an amalgamation – although virtually all public company transactions proceed by way of plan of arrangement.
CONSIDERATION An acquirer of a Canadian public company by way of plan of amalgamation can pay with cash, securities or a combination of cash and securities. Similar to a plan of arrangement, there is no specific prohibition on offering different consideration or providing different treatment to different shareholders. However, if related parties of the target company are offered different consideration or if they receive a collateral benefit, it may be necessary to obtain an independent formal valuation of the target shares, as well as approval by a majority of the votes cast by minority shareholders at the shareholders’ meeting. If securities are to be offered as consideration, the issues discussed above in the context of takeover bids would also be relevant. PROCESS Similar to a plan of arrangement, an amalgamation can achieve a 100% acquisition in a single-step transaction and the threshold for shareholder approval is generally 66 2⁄3% of the votes cast by shareholders represented at the shareholders’ meeting (which representation is likely to be less than 100%), rather than 66 2⁄3% of all outstanding shares as in a takeover bid. However, due to the flexibility provided by plan of arrangement structures, that form of acquisition of Canadian public companies is more common. Negotiated (or Friendly) Acquisition In a negotiated (or friendly) scenario, an acquisition of a Canadian public company may be completed by way of a “supported” takeover bid, a plan of arrangement or an amalgamation – although virtually all public company transactions proceed by way of plan of arrangement. In Canada, negotiated (or friendly) acquisitions are typically sequenced so that the acquirer provides a non-binding indication of interest to the target company and, in certain cases, the target company may provide the acquirer with the right to negotiate exclusively with the target company. Before due diligence access is provided, the target company will request that the acquirer execute a confidentiality agreement with, in many cases, a standstill provision restricting the acquirer from proceeding with an unsolicited acquisition. Typically, the acquirer will complete its due diligence investigations before a definitive acquisition agreement is signed because it is rare for a definitive agreement to contain a due diligence condition.
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Davies | dwpv.com
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