CHAPTER 02 Plans of Arrangement
Advantages of Arrangements
– Lower acceptance thresholds than a bid: > Generally requires two-thirds of the votes cast at the meeting in person or by proxy. > No prohibition on an acquirer voting securities it holds in the target, provided it is not a “related party” of the target (e.g., a holder of more than 10% of target shares) under business combination rules in Multilateral Instrument 61-101. – One-step acquisition eliminates “bridging” and financing risks. – Tax-planning opportunities: > ability to clearly order transaction steps around the effective time; > allocation of basis to assets to be divested; > distribution of safe income and return of capital. – Greater flexibility in dealing with target’s assets, including possible spinoff of assets. – Implementation of “exchangeable share” structure facilitated. – Flexibility in dealing with stock options and warrants. – No prohibition of collateral benefits and pre-bid purchases. – Possible to offer “unequal” consideration. – Permissibility of financing condition. – Flexibility in dealing with public debt (and other creditors). – Availability of section 3(a)(10) registration exemption in the United States.
Disadvantages of Arrangements
– More cumbersome and time-consuming than a friendly takeover bid because of proxy solicitation and court proceedings – Fairness hearing may be used as a forum for challenge by securityholders – Ability of complainants to appeal court order may delay closing
– Dissent and appraisal remedy generally available – Process is target-driven, rather than acquirer-driven
09
Davies | dwpv.com
Powered by FlippingBook