On July 4, 2012, the Ontario Securities Commission (the
"OSC") issued a cease-trade order with respect to a
shareholder rights plan (the "Shareholder Rights Plan")
put in place by Thirdcoast Limited ("Thirdcoast") in
response to an unsolicited takeover bid by its largest shareholder,
Parrish & Heimbecker, Limited ("P&H").
The battle for Thirdcoast, a reporting issuer in Ontario whose
shares are mainly traded over-the-counter, began in response to the
passing of a law which will end the effective monopoly of the
Canadian Wheat Board on August 1, 2012. The law will allow grain
suppliers to set their own prices and quantities of the grain they
sell, leaving food producers, such as P&H, scrambling to ensure
an adequate supply of grain is in place when the law comes into
effect. P&H's interest in Thirdcoast stems from a highly
profitable grain terminal it owns and operates in Goderich,
After initially attempting to engage in discussions with
Thirdcoast in February, on March 6, 2012, P&H, at that time
owning approximately 28% of the outstanding shares of Thirdcoast,
announced its intention to make a bid to purchase all of the
remaining shares not owned by it at a price of $115 per share. In
addition, it announced that it had entered into lock-up agreements
(the "Lock-Up Agreements") with shareholders holding
approximately 24% of the outstanding shares of Thirdcoast.
On May 29, 2012, after the release of an independent valuation
valuing the Thirdcoast shares at $130 to $170 per share, P&H
increased its offer price to $155 per share. P&H's bid was
formally commenced on May 31, 2012, and was initially scheduled to
expire on July 5, 2012.
On May 30, 2012, Thirdcoast announced it had adopted the
Shareholder Rights Plan "to allow the Board time to explore
and develop strategic alternatives in the context of
[P&H's] Insider Bid."
P&H applied to the OSC on June 8, 2012 seeking a cease-trade
order in respect of the Shareholder Rights Plan. In response,
Thirdcoast requested the Shareholder Rights Plan remain in place
for a further 30 days.
In reaching its decision to cease-trade the securities relating
to the Shareholder Rights Plan (and dismissing an application
brought by Thirdcoast seeking to effectively invalidate the Lock-Up
Agreements), the OSC cited the following key factors:
Thirdcoast shareholders had not been afforded the opportunity
to approve the Shareholder Rights Plan, no evidence presented of
shareholder support for the Shareholder Rights Plan, and it was
unlikely that shareholders would approve the Shareholder Rights
Plan in light of the Lock-Up Agreements.
The Shareholder Rights Plan was adopted in response to
At the time of the scheduled expiry of P&H's bid, 135
days would have elapsed from when P&H's first notified
Thirdcoast of its intention to make its bid, no other viable bidder
had emerged, and the OSC was not satisfied that the Shareholders
Rights Plan continued to provide an opportunity for further
The evidence did not support the allegation that P&H's
bid was coercive.
Sufficient evidence was not presented to conclude that keeping
the Shareholder Rights Plan in place for a further 30 days would
serve the purpose of enhancing shareholder value.
The OSC's decision to cease-trade the Shareholder Rights
Plan reaffirms the existing Canadian securities jurisprudence that
all shareholder rights plans must, at some time, be set aside to
allow shareholders themselves to decide whether to tender to an
outstanding bid, with the factors first enumerated in Royal Host
Real Estate Investment Trust continuing to be relevant to determine
when that time has come.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).