Canadian Going Private Transactions: Practices and Procedures - Target Board Considerations

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Target Board Considerations

See Chinese version below [中文版参阅下文].

In the event that someone approaches a public company about potentially making an offer to buy it or to merge with it, there are a range of possible responses from the target company management and board of directors. The legal obligation of the board under the Canada Business Corporations Act (and other Canadian corporate statutes are substantially the same in this regard) is to:

–     act honestly and in good faith with a view to the best interests of the corporation; and

–     exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

One possibility is that the target company board could decline to negotiate with the potential bidder. If the price being proposed is clearly not in the best interests of the target company and its shareholders, the board might decide not to make non-public information available to the bidder and not to waste the company’s time and energy in pursuing a bid that does not represent appropriate value for the target company. A bid can be very disruptive to the day-to-day management of the target company, and just the fact that an approach has been made by some third party does not obligate the target company’s board to put the company up for sale.

If, on the other hand, the interested party is proposing a price that the board considers could be in the interests of the target company and its shareholders, perhaps after some negotiation, the board may decide to pursue negotiations with the interested party. That might be done either exclusively and confidentially for a relatively short period of time, or the board might decide that it should discuss a potential transaction with one or more other parties on a confidential basis or trigger a more public auction by announcing that it is considering a sale or exploring “strategic alternatives”.

It is not mandatory that Canadian public companies be sold by way of an auction. Many companies are sold pursuant to a process whereby the target negotiates confidentially with one or select third parties and then issues a press release after a support agreement has been entered into. At that point, the target company’s board is recommending to its shareholders that they accept the transaction, but whether or not the bidder succeeds will depend upon the reaction of the shareholders. In the case of a take-over bid, the bidder will have to mail its take-over bid circular to target shareholders and its bid must be open for at least 35 days (provided the target company’s board has agreed to reduce the bid period). In the case of a business combination, there is generally a period of nearly one month between the mailing of the target’s management information circular and the holding of its shareholders’ meeting. In either case, during that time, potential competing bidders may come forward. Depending on the terms of the support agreement, there may be large or not so large obstacles to someone else coming forward with a superior proposal. The size of the break fee and whether or not there is a “right to match” in the support agreement (which is almost always the case) will be relevant to other potential bidders. In addition, while it is rare in Canada, some target companies have signed support agreements with “go shop” provisions whereby the target puts the bidder on notice that it intends to actively solicit higher offers from third parties.

目标公司董事会考虑的问

如果有人同一家上市公司接触并提出可能会出价购买或合并该公司,目标公司的管理部门或董事会可以做出多种可能的答复。按照《加拿大商业公司法》的规定(就此而言,加拿大的其它公司法也基本类同),董事会在法律上有义务:

–  为了公司最大利益而诚实和诚信地行事;以及

–  采取一个合理审慎的人在类似情况下应有的谨慎、尽职和技巧。

一种可能性是目标公司董事会拒绝同潜在的收购方谈判。如果所开出的价格明显不符合公司及股东的最佳利益,董事会可以决定不浪费公司的时间和精力去寻求一项不能代表本公司适当价值的出价。忙于应对收购会对目标公司的日常经营造成很大的干扰,而且仅仅因为某个第三方的行动,董事会没有义务将公司出售。

反之,如果董事会认为对方的收购条件符合公司和股东的利益,董事会可以在初步谈判后同该方就交易展开深入的谈判。这种谈判可以在较短的时间里秘密的与一个收购方进行,董事会也可以决定同时与一个或者多个收购方进行秘密的谈判,也可以发布公告进行公开拍卖出售或探索“战略替代方案”。

加拿大上市公司的出售并非一定要以拍卖的方式来进行。
许多公司的出售所遵循的过程是,目标公司秘密地同一个或多个第三方谈判,在和其中一个第三方签定支持协议后发布新闻。此时,目标公司董事会建议股东们接受交易,但收购成功与否取决于股东们的反应。如果是要约收购,收购方须将要约收购通告寄送给目标公司的股东们,而有效要约期至少要有35天(如果目标公司的董事会同意缩短要约期)。如果企业合并的情况下,目标公司从寄出管理委任通告到举行股东会议大约有一个月的时间。就上述两种情况而言,这段时间里潜在的要约收购对手可能会涌现出来,而出他们始终有权向目标公司提出更好的方案。取决于支持协议的条款,对于提出更好方案的新的收购方而言,其所面临的障碍或许很大,但也可能并非如此。终止费的多少和支持协议中是否有“匹配权”条款会对潜在要约收购方产生影响。近来有些目标公司在签订的支持协议中加上了“寻求买方”的规定,向要约收购方明示它会积极向第三方征求更高出价的收购提案。

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