Canada: BCSC Cease Trades Aurizon Mines Ltd. Poison Pill (Again)

The future of shareholder rights plans (or "poison pills"), a commonly used tool in the take-over bid world, is up in the air. As outlined in our March 15, 2013 Update, "Canadian Securities Regulators Propose New Regimes for Shareholder Rights Plans", Canadian securities regulators have recently proposed significant changes to the rules governing shareholder rights plans.

In the midst of this, the decision of the British Columbia Securities Commission ("BCSC") to cease trade a shareholder rights plan adopted by Aurizon Mines Ltd. ("Aurizon") appears to confirm that until the new rules are adopted it's business as usual for rights plan oversight in Canada. At the same time, the facts surrounding the Aurizon rights plan raise interesting questions about the continuing role of securities regulators in reviewing defensive tactics other than rights plans.

Background

The rights plan cease traded by the BCSC was actually the second shareholder rights plan adopted by Aurizon in response to the $780 million hostile take-over bid launched in January of this year by Alamos Gold Inc. ("Alamos"). An initial poison pill that had been put in place by Aurizon in January following Alamos' unsolicited bid was ceased traded by the BCSC on February 18, 2013.

On March 4, 2013, in compliance with the BCSC's order, Aurizon announced that it had waived the (initial) rights plan and that it had entered into an agreement for the acquisition of Aurizon (through a statutory arrangement) by Hecla Mining Co. ("Hecla") for consideration valued at approximately $796 million. The agreement with Hecla provided for a $27.2 million "break fee" (approximately 3.4% of the transaction consideration) to be paid if Alamos acquired more than 33⅓% of Aurizon's common shares.

One week later, after Alamos waived the minimum tender condition under its bid, Aurizon adopted a second shareholder rights plan, presumably to reduce the advantage of Alamos' head start (effectively, to delay completion of the Alamos bid to provide time for the Hecla transaction to be considered by Aurizon's shareholders). Alamos extended its offer, and then applied to the BCSC to have the second rights plan cease traded. Alamos also applied to have the Hecla transaction cease traded pending removal of the break fee provisions of the arrangement agreement.

The Decision and the Aftermath

On March 18, 2013, the BCSC cease traded the second rights plan, but left the break fee in place. A day later Alamos announced that it was abandoning its bid for Aurizon, because the break fee made the cost of the transaction too high.

The cease trading of the two Aurizon rights plans is consistent with the longstanding Canadian securities regulator y approach that a rights plan "must go" once it has accomplished its purpose of encouraging competing bids for the target issuer, and further that rights plans cannot be used to equalize timetables for competing transactions.

The BCSC has not yet released reasons for its ruling but, as noted, did not disturb the break fee. One of the core elements of the debate about rights plans specifically, and bid tactics more generally, is whether securities regulators should be involved at all in their regulation, or whether such tactics should be regulated only by the courts as a matter of fiduciary duty law or pursuant to the oppression remedy under corporate legislation.

In the recent proposals, the Canadian Securities Authorities reiterated their view that securities regulators have a role in regulating take-over bids to ensure that such tactics do not unduly restrict the ability of shareholders to respond to a bid, and do not unduly discourage the making of hostile bids. Consequently, though the new rights plan rule will, if adopted, tend to shift fights over poison pills from hearings in front of the securities regulators to shareholder meetings at which rights plans are to be approved, and perhaps to courts to consider corporate law compliance issues, the securities regulators have indicated that they intend to maintain a role. Consequently, their views on defensive measures such as break fees will continue to affect M&A in Canada.

In Aurizon, Alamos did not complain about the size of the break fee. Rather, Alamos argued that the break fee that was paid to Hecla was contrary to the "public interest"; it was not used to secure a better deal for shareholders to consider or to generate a higher bid. It was used only to tip the balance in favour of the Hecla deal. The BCSC's reasons, when released, will hopefully shed some light on its perspective on the break fee question. The BCSC's decision not to overturn the fee indicates that regulators continue to view break fees as appropriate in certain circumstances. However, in light of the changing regulatory landscape, guidance as to what constitutes reasonableness in terms of the use of a break fee mechanism, would be instructive.

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Blake, Cassels & Graydon LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Blake, Cassels & Graydon LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
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).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions