Canadian Going Private Transactions: Practices and Procedures

In the recent years, there has been increased interest among investors based in Asia to invest in publicly-listed companies in Canada. This blog post is the first of a series of articles regarding how going private transactions involving public company targets are conducted in Canada. The law in this area is complex. As such, our articles series will provide a summary rather than a detailed analysis of the relevant statutory provisions, case law and precedent transactions.

The Chinese version is to follow shortly.

There are two commonly-used methods to acquire a public company in Canada: a take-over bid and a business combination.  This article provides the general practices and procedures for a take-over bid. We will summarize the procedures for a business combination in our next article.

TAKE-OVER BIDS

Take-over bid is the most straightforward approach, whereby the bidder makes its offer directly to the target company shareholders.

A take-over bid is defined generally as an offer made to a person in Canada to acquire outstanding voting or equity securities of a class of securities, which, if accepted, would result in the bidder (together with persons acting in concert with the bidder) owning 20% or more of such class.

Most commonly, the bidder will make an offer to all of the shareholders of the target company to buy their securities for cash, non-cash consideration (typically, securities of the bidder), or a combination of cash and non-cash consideration. All holders of the same class of securities must be offered identical consideration. This means that it is not permissible to have collateral agreements with, for example, a controlling shareholder or a shareholder who is a senior officer that would result in additional consideration flowing to that shareholder (subject to certain exceptions covering, for example, employment contracts or severance arrangements). In addition, any purchases made by the bidder of securities that are of the same class as the securities that are subject to the bid and that were effected during the 90 days prior to the bid will be “integrated” into the bid. This means that the bidder will be required to offer to acquire the same percentage of securities and offer to pay the same amount and form of consideration as was offered in any pre-bid acquisitions, excluding normal course purchases on a stock exchange.

The offer must remain open for shareholders to accept for at least 105 days (referred to as the “bid period”), subject to a target board’s ability to reduce the bid period by either:

  • issuing a news release announcing a shorter bid period for a specific take-over bid (which cannot be less than 35 days), in which case all outstanding or subsequent take-over bids will also become subject to the shorter minimum bid period from the date of their respective bid, provided that the bid must not expire before 10 days from the date of variation (a bidder can, of course, elect to keep its bid open for longer); or
  • issuing a news release indicating that it has agreed to enter into, or determined to effect, a specified alternative transaction (generally, a plan of arrangement or other business combination requiring shareholder approval), in which case all outstanding or subsequent take-over bids will become subject to a 35-day minimum bid period from the date of their respective bid.

A take-over bid must be subject to a non-waivable condition that more than 50% of all outstanding target securities, excluding securities owned or held by the bidder and its joint actors (the “minimum tender requirement”), be tendered and not withdrawn before the bidder can take up any securities under the take-over bid. The take-over bid must also be extended by the bidder for at least an additional 10 days after the bidder achieves the minimum tender condition and all other terms and conditions of the bid have been complied with or waived.

After the take-over bid expires, the bidder is prohibited from acquiring additional securities of the same class for 20 business days, except for normal course purchases over a stock exchange.

Certain take-over bids are exempt from compliance with the foregoing requirements, including:

  • normal course purchases on an exchange, at the prevailing market price for the securities, not exceeding 5% of the outstanding securities of the class (whether acquired in reliance on this exemption or otherwise) in a 12-month period (referred to as the de minimis exemption);
  • transactions involving the acquisition of securities from not more than five shareholders of the target company, provided that the price paid does not exceed 115% of the prevailing market price (referred to as the private agreement exemption);
  • the acquisition of securities for which there is no published market of a company that is not a reporting issuer and has fewer than 50 shareholders exclusive of current or former employees; and
  • foreign take-over offers where, inter alia, the number of securities held beneficially by Canadian shareholders is reasonably believed to be less than 10% of the total outstanding securities, and Canadian shareholders are entitled to participate on terms at least as favourable as other shareholders.

Second Step Takeout Transactions

If the bidder succeeds in acquiring at least 90% of the target company securities within 120 days of the commencement of the bid (other than securities owned by the bidder at the commencement of the bid) then the corporate statute governing the target company typically provides that the bidder can effect a “compulsory acquisition” to acquire the securities held by the remaining target shareholders through a relatively simple statutory process. This process can take up to 30 days or so, although the timing varies depending on the jurisdiction of incorporation of the target company. Depending on the target company’s jurisdiction of incorporation, the bidder’s exercise of its compulsory acquisition right may trigger “dissent rights” for the non-tendering shareholders, which would entitle them to have the “fair value” of their securities determined by a court.

Alternatively, if the bidder acquires at least two-thirds of the outstanding securities, but less than 90%, the bidder may call a special meeting of the shareholders of the target company (including the bidder) for the purposes of voting on an amalgamation with an affiliate of the bidder, the result of which will be that the remaining “minority” shareholders are squeezed out for the same consideration that was offered in the take-over bid. Subject to certain conditions, the votes attached to securities acquired under the bid may be included as votes in favour of the amalgamation for purposes of determining whether the required minority approval has been obtained.  This second step take-out transaction (which is often referred to as a “squeeze-out merger”) takes longer than the 90% compulsory acquisition under the corporate statute because of the need to call a meeting of the shareholders of the target company.

 

在加拿大进行公司私有化之
方法与步骤

近年来,亚洲投资者对投资加拿大上市公司的兴趣日益浓厚。这篇博客文章是涉及在加拿大如何就进行上市公司目标的私有化交易系列连载文章的第一篇。由于这方面的法律很复杂,因此,我们的系列连载文章对相关的法律条款、案例法和先例交易仅是一般性概述,而非对其进行详细分析。

在加拿大收购上市公司有两种常用的方法,即:要约收购和企业合并。本文阐述了要约收购的一般方法和程序步骤。我们将会在下文给予读者概述其企业合并的程序步骤。

要约收购

首先,最直截了当的方式就是要约收购。在此,收购方向目标公司的股东直接提出要约报价。

要约收购通常系指:收购方向加拿大公司就拥有表决权的证劵或股票持有人发出要约收购提出报价,如果接受,收购方(包括其一致行动人)将会持有至少该类以发行股票的20%。

最常见的是,收购方会向目标公司的所有股东提出以现金或非现金方式(通常是收购方的股票)作为对价来购买其股票的要约报价。向所有股东提出的要约报价必需完全一致。这意味着收购方不能与控股股东或作为高级管理人员的股东签订附带协议,从而导致向该股东支付额外的对价(但某些例外情况除外,例如,包括雇佣合同或遣散安排)。此外,收购方在要约收购前90天内收购的同类证券,将被“纳入”要约收购。这意味着收购方必须购买与收购前购买的证券相同的份额,价格并支付相同形式的对价,但这里不包括在证券交易所进行的正常交易。

要约报价必须向股东们开放至少105天以供他们接受(即“要约期”),但目标公司的董事会可以通过以下方式缩短要约期:

  • 发布新闻公告,宣布给特定要约收购更短的要约期(不能少于35天),在这种情况下,所有未完成或后续的要约收购也将采用更短的要约期;但前提是要约收购不得在变更日期后的10天之内到期(收购方当然可以选择保持其投标的延长);或者
  • 发布新闻公告,表明其已经同意进入或决定实施特定的另类交易(通常是安排计划或其他需要股东批准的企业合并),在这种情况下,所有未完成或后续的要约收购将会从各自的出价之日起必须保持开放至少35天。

要约收购必须符合以下不可豁免的条件,即:收购方要约收购在收购任何证券之前,由其他持有人(收购方及其联合参与方除外)持有目标公司至少百分之五十的证券参与要约收购并且未被撤出。在此最低额投标条件满足后,以及要约收购的所有其他条件已得到遵守或被豁免之后,收购方还必须将要约收购至少延长十天的宽限期。

要约收购期限届满后,除通过证券交易所正常购买交易过程以外,禁止要约人在20个工作日内购买同类其他证券。

某些要约收购不受上述要求的约束,包括:

  • 在12个月期间内,以证券的现行市场价格在交易所购买的股票,不应超过该类别未发行的证券比例5%(无论是通过此项豁免还是其他方式购买(即:最低豁免);
  • 只要收购方所收取的价格证劵为市场价格的115%(即,私下协议),则涉及从目标公司的人数不超过五位股东;
  • 收购非发行方公司的证券,并且此类证券无公开市场,并且该公司股东人数少于50位(不包括现在或以前的雇员); 以及
  • 外国要约收购: 如果要约收购所涉证券中,加拿大居民持有的证券比例不足10%,加拿大股东应有权按照与适用于全体股东的条款同样有利的条款,参与要约收购。

 分拆交易的第二步骤

如果收购方在要约后120日内成功获得至少百分之九十的目标公司股份(不包括收购方在收购开始时所拥有的股份),公司法一般允许收购方通过相对简单的法律程序,以“强制收购”的方式得到剩余的股份。完成该程序大概需要30天或更长时间,这一程序取决于目标公司所在地的法规。收购方行使其强制收购权可能会触发非招标股东的 “异议权”,从而赋予他们由法院裁定证券“公允价值”。

另外一种情况是收购方获得至少购买三分之二以上但低于百分之九十的流通股份,收购方则须召集目标公司的股东特别会议(包括收购方在内),以便投票表决是否为收购方的从属公司兼并,或进行其它方式的交易,其结果是以要约收购的原有价格获得那些“少数”股东的股份,并将他们挤出分拆。在一定条件下,为确定是否已获得所需的少数股东批准,可以根据要约收购获得的证券所附的票数列为赞成合并的表决情况。由于第二步收购交易需要召集股东会议,此类“分拆性”交易 (通称为“分拆式兼并”)与百分之九十的“强制收购”相比需要的时间更长。

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