Defensive Measures – National Policy 62-202 sets out the views of the Canadian securities regulators with respect to the defensive tactics that a target company may employ in advance or in the face of a takeover bid. The Policy expresses securities regulators’ view that unrestricted auctions produce the most desirable results in takeover bids. – The Policy warns that the securities regulators may take action where defensive measures are likely to deny or severely limit the ability of shareholders to respond to a takeover bid, although it recognizes that defensive measures may be taken to obtain a better bid. “JUST SAY NO” – It is generally accepted, as a matter of securities law and policy, that boards cannot “just say no” to a bid in Canada, but must rather be able to convince shareholders that it is in their interest to reject the bid. – The U.S.-style “just say no” defence has not been tested by Canadian courts. Depending on the circumstances, a company may be able to convince a court that the implementation of a “just say no” defence is consistent with the fiduciary duties of the directors and that the business judgment of the directors should be afforded deference by the courts. DEFENSIVE PRIVATE PLACEMENTS – A private placement of securities made in the face of an actual or impending takeover bid can be challenged before the Canadian securities regulators as an improper defensive tactic. > Since the 2016 bid amendments, the utility of a private placement as a defensive tactic has increased because an issuance of shares by the target may make it difficult for the bidder to satisfy the 50% minimum tender condition. > In the 2016 decision of the Ontario and British Columbia securities commissions in Re Hecla Mining Company , the commissions established an analytical framework for determining when they will intervene to cease-trade a private placement. In summary, if the effect of the private placement is to impair the bid and the intention of the target in making the private placement was to alter the dynamics of the bid process, securities regulators will intervene if investor protection concerns outweigh the board’s business judgment in deciding to issue shares in the face of the bid. RESTRUCTURING/RECAPITALIZATION – The goal is to give shareholders the opportunity to receive substantial cash value on a current basis while preserving the independence of the company. – One possible restructuring transaction would be a sale or spinoff of a significant asset or assets. > Substantial advance analysis and planning is required, including tax analysis.
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Canadian Mergers & Acquisitions
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