CHAPTER 04 Shareholder Activism Abates, but Not for Long: Significant Activity and Developments in 2020
Spotlight: Mini-Tenders as a New Tool in M&A Activism?
It should come as no surprise that the leverage of a shareholder seeking to challenge a transaction increases with the size of its stake in the issuer. Unfortunately, it can prove quite challenging and costly to increase one’s stake meaningfully, particularly after a deal has been announced. However, in some circumstances, a motivated activist may be inclined to deploy a “mini-tender” to increase its stake and win a seat at the bargaining table. In the M&A context, a shareholder making a mini-tender seeks to build a stake of up to 19.9% (therefore, staying below the 20% threshold at which Canada’s takeover bid regime and associated requirements would be triggered) by offering to acquire shares from other shareholders at a small premium to the applicable transaction price and within a very short time frame. The offer may also be coupled with a solicitation of proxies with respect to shares tendered. While not frequently used in Canada (especially relative to the practice in the United States), the mini-tender may be an effective means for a minority shareholder to build its equity stake while also securing proxies to vote the tendered shares; this, in turn, can help a minority shareholder block (or influence changes in the terms of) a deal. This strategy was most recently implemented in two separate transactions – one involving an insider bid for Hudson’s Bay Company (HBC), formerly listed on the Toronto Stock Exchange (TSX), and the other involving
Air Canada’s acquisition of TSX-listed Transat A.T. Inc. In each case, the activist opposed the proposed transaction, with the activist in HBC seeking a better deal and the activist in Transat hoping to launch a competing bid. In the face of the going-private insider buyout led by HBC’s executive chair, Richard Baker, who was supported by a group of locked-up shareholders representing approximately 57% of HBC shares, The Catalyst Capital Group Inc. launched a mini-tender to acquire up to 10.75% of HBC common shares at a price of $10.11 per share, a 7% premium to the Baker group’s offer. Catalyst also used the public broadcast proxy solicitation exemption to garner support from other shareholders. In total, 28.24% of HBC shares, including Catalyst’s shares, were opposed to the Baker offer. Catalyst’s strategy included a complaint to the Ontario Securities Commission (OSC) and the announcement of a competing offer for HBC at $11.00 per common share. Catalyst was successful in its mini-tender and ultimately, through its strategy, achieved an increase in the Baker group offer to $11.00 per share. In the case of Transat, Group Mach Acquisition Inc. employed a similar strategy when it offered to acquire up to 19.5% of the outstanding Class B voting shares of Transat for an 8% premium to Air Canada’s $13.00 per share offer. As a condition of the Group Mach offer, the depositing shareholders also had to give a proxy to
61
Davies | dwpv.com
Powered by FlippingBook