CHAPTER 03 Pre-bid Considerations
Structuring the Offer
CONSIDERATION: CASH OR SECURITIES? – If securities are offered as consideration, prospectus-level disclosure about the acquirer, including the acquirer’s financial statement disclosure, will be required. – If the acquirer is a mining company offering shares, independent technical reports on material properties may be required. – May also require pro forma combined financial information. – Also requires detailed disclosure of the bidder’s plans and proposals for target post-closing. – The bid circular is not reviewed by the securities commission, so there is no regulatory timing disadvantage when share consideration is offered. – A bidder that offers share consideration may become a “reporting issuer” and subject to Canadian public company disclosure requirements. CONDITIONS – Any conditions (except financing in a takeover bid) are permitted and frequently include the following: > no rights plan or waiver of application of rights plan to bid > Competition, Investment Canada, HSR approvals and any regulatory approvals for change of control > no material adverse change – All bids are subject to a statutory minimum tender condition requiring more than 50% of target securities held by persons other than the bidder and its joint actors to be tendered before the bidder can take up any securities under the bid.
> If the bidder is seeking 100%, minimum tender should be the greater of 66⅔% and majority- of-the-minority to have certainty of execution of second-step going-private transaction.
COATTAILS – Dual class companies listed on the TSX are required to provide coattails – that is, provisions that effectively entitle holders of non-voting or subordinate voting shares to participate in a bid for voting or multiple voting shares. – Companies with long-standing dual class structures may have avoided coattail requirements so a purchase of control may be made without an offer to non-voting or subordinate voting shares. – Coattails are typically triggered when a takeover bid is made for the voting/multiple voting shares, unless offers are made for other shares on the same basis. – Acquisition made by way of plan of arrangement may not trigger a typical coattail.
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