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Canadian Going Private Transactions: Practices and Procedures - Transaction Documentation

Transaction Documentation

See Chinese version below [中文版参阅下文].

Following our previous posts regarding the acquisition of public company targets in Canada by way of a takeover bid (post link) and a business combination (post link), the following provides an overview of the main transaction documents that need to be negotiated and prepared for such acquisitions.

DOCUMENTATION

A going private transaction will often involve a contract between the potential acquiror and the target company, a contract between the potential acquiror and the target’s major shareholders and one or more disclosure documents that are mailed to the target company shareholders.

SUPPORT AGREEMENTS

Prior to announcing a take-over bid or business combination, a “friendly” bidder will generally seek to enter into a support agreement with the target company. Pursuant to such agreements, the bidder will commit to moving forward with the transaction on an agreed timetable and at an agreed price. The board of directors of the target company will agree that it will recommend that shareholders tender into the take-over bid, or vote in favour of the business combination, and that the board will cause the tar-get company to be run in the normal course of business until the proposed transaction has either been concluded or rejected by the shareholders.

In addition, the board of the target company will usually agree not to solicit competing proposals to acquire the company but will reserve the right to respond to unsolicited inquiries and to recommend a competing transaction if it amounts to a “superior proposal” for the shareholders. The first bidder will often have the right to match any superior proposal and, if it chooses to do so, the support agreement remains in place and the directors of the target company must maintain their recommendation in favour of the original bidder. Should the original bidder choose not to match the superior proposal, generally the board of the target company is entitled to terminate the first support agreement, enter into a new support agreement with the second bidder and change its recommendation to the shareholders in favour of the superior proposal. In that event, the target company typically owes a break fee to the original bidder.

Canadian courts have held that break fees are appropriate in the right circumstances, but that they must be reasonable. Generally, these fees tend to range between 2% and 5% of the aggregate equity value of the transaction with fees in the upper end of that range only after a full market canvass.

Some transactions will have a “reverse break fee” whereby the bidder will owe a substantial payment to the target company if it fails to receive regulatory approval (often anti-trust approval) for the acquisition.

LOCK-UP AGREEMENTS

If the target company has one or more shareholders with a significant number of securities, in addition to having a support agreement with the target company the bidder will seek a lock-up agreement with the significant shareholder. This agreement will provide that the bidder commits to making the bid on agreed terms and at an agreed price, and the significant shareholder agrees either to tender into the take-over bid or to vote at the target company’s shareholders’ meeting in favour of the business combination.

The lock-up agreement may be either “hard” or “soft”. A soft lock-up agreement allows the shareholder to withdraw and move its support to a competing transaction if a superior proposal emerges. A hard lock-up agreement commits the shareholder irrevocably to support the proposed transaction and, often, irrevocably commits the bidder to purchasing the locked-up securities (even though some condition of its bid has failed and so it will not purchase securities from any other shareholders). Given the mandatory tender condition that has recently become law (i.e. that more than 50% of all outstanding target securities (other than those owned or controlled by the bidder and its joint actors) be tendered and not withdrawn before the bidder can take up any securities under the take-over bid), an irrevocable commitment to purchase the locked-up securities is now only meaningful in the take-over bid context where the bidder can lock-up more than 50% of the target company’s securities that are owned by persons other than the bidder and its joint actors (or otherwise be confident of achieving the minimum tender condition).

交易文件

继我们之前有关以要约收购(post link)和企业合并(post link)的形式收购加拿大上市公司的介绍,本篇博客概述了此类收购需要协商和准备的主要交易文件。

文件

上市公司收购交易往往涉及到潜在收购方与目标公司之间的合同、潜在收购方与目标公司主要股东之间的合同、以及邮寄给目标公司股东的披露文件。

支持协议

“善意”收购方在宣布进行要约收购或企业合并之前,一般会寻求与目标公司订立一个支持协议。 根据这个协议,收购方将承诺按照一个经商定的时间表和价格来将推进交易。目标公司的董事会将同意推荐股东接受要约收购或投票赞成企业合并,董事会将使目标公司按正常业务程序运作直至该交易交割或该交易被股东们拒绝。

另外,目标公司的董事会通常同意不征求与现有提案竞争的收购提案,但将保留权利对非应邀的询问作出回应以及在收到对股东来说是“更好的提案”的情况下,推荐股东接受与现有提案竞争的收购提案

通常,现有提案的收购方有权改善其收购条件,使现有提案比得上“更好的提案”。如果选择这样做,支持协议仍然有效,目标公司的董事们就必须维持他们的建议以支持第一个收购方。如果第一个收购方选择不改善其收购条件,则目标公司的董事会就有权终止第一个支持协议,而和第二个收购方订立一个新的支持协议,并更改其建议推荐股东接受“更好的提案”。在那种情况下,目标公司通常要向第一个收购方支付违约费。 

加拿大法院已经裁定: 在正常的情况下该违约费要合适,但必须合理。一般来说,违约费往往占交易总股价的2%至5%之间,而只有在目标公司进行全面市场调查之后,违约费才处于该范围的上限。

另一些交易将有“反向违约费”,如果收购方没有收到监管机构对收购的批准(通常是反垄断法方面的批准)的话,就要向目标公司支付大笔款项。

锁定协议

如果目标公司的一个或更多的股东持有相当数量的股票,那么,除了和目标公司签署一项支持协议之外,收购方还将寻求和这些重要股东签署一项锁定协议。这个协议将规定收购方承诺将按照商定的条款和价格来出价,而重要股东则同意参与要约收购或者在目标公司的股东会议上投票赞成企业合并。

锁定协议既可以是“硬性”的,也可以是“软性”。软性锁定协议允许股东在出现更好的提案时退出并转向支持另一个的交易。而在硬性锁定协议下,股东承诺不可撤销地支持交易提案,并且通常收购方也不可撤销地承诺购买锁定的股份(即使其要约收购的一些条件未能满足而收购方不购买任何其他股东的股份)。鉴于最近成为法律的强制性最低收购条件(即:收购方在收购任何证券之前,持有目标公司至少百分之五十的证券持有人(收购方及其联合参与方除外)参与要约收购并且未撤出),收购方不可撤销地承诺购买锁定的股份只有在收购方可以锁定在它和联合参与方之外持有50%以上目标公司的证券(或相反地,它有信心达到最低收购条件)。

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