Share Accumulations
TOEHOLD ACQUISITION – Purchases up to 19.9% (together with securities beneficially owned by purchaser and joint actors) are not a “takeover bid.” – Open market purchases or private agreements are permitted (although market purchases may increase price or tip off target) > Often done to lower cost of acquiring target shares because no premium is paid on shares > May reduce acquirer’s risk by allowing it to recoup at least some of its costs by selling toehold shares to a superior competing offer – Pre-bid integration rules should be considered at this stage because of implications for a later takeover bid. – Securities so acquired will not count toward the 50% mandatory minimum tender condition, the 90% compulsory acquisition threshold or as part of the minority for a majority-of-the-minority vote on a second-step going-private transaction. – Purchases that would result in a holding of 20% or more constitute a takeover bid that requires an offer to all holders of the class unless an exemption is available. PRIVATE AGREEMENT TAKEOVER BID EXEMPTION – The principal exemption from the takeover bid rules is for private agreements: > five sellers or fewer, and consideration not exceeding 115% of 20-day average closing price > critical tool for acquirer proposing a creeping acquisition of control INSIDER TRADING PROHIBITION – Once a person “is considering, evaluating or proposing to make a takeover bid” for a target, or becoming a party to a merger or other business combination with a target, all persons who are insiders, affiliates, associates, professional advisors and officers, directors or employees of any of them are in a “special relationship” with the target and may not trade in securities of the target until the transaction is announced. > This restriction does not apply to the person proposing to make the bid itself.
12
Canadian Mergers & Acquisitions
Powered by FlippingBook