Rather than conducting an auction process to seek superior alternatives, a target company may seek to enhance shareholder value through alternative means such as a recapitalization, spinoff or strategic alliance. Any defensive tactic that denies or materially limits the ability of shareholders further postpone the time when shares can be taken up by the offeror. However, pre-existing rights plans may still be used to prevent “creeping” bids, whereby the offeror buys large blocks of shares of the target company through limited private acquisitions that are exempt from the takeover bid requirements. Canadian courts have heard challenges of private placements being attempted in response to a hostile takeover bid. One of the key takeaways of the court decisions is that in order for a private placement to succeed in the context of an unsolicited bid, it must not merely be a defensive tactic and must have a legitimate financing purpose. For additional information, visit Davies’ website at dwpv.com to view our publications Canadian Mergers and Acquisitions — A Guide for Foreign Investment Banks, Bidders and Boards and The Hostile Bid Is Dead. Long Live the Hostile Bid? .
to respond to a bid will likely be scrutinized by Canadian securities regulators.
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Doing Business in Canada
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