Canada: Augusta’s Rights Plan – A Hard Pill For Hudbay To Swallow

On May 2, 2014, the British Columbia Securities Commission (BCSC) issued an oral decision declining to immediately cease trade the shareholder rights plan (also known as a "poison pill") of Augusta Resource Corporation (Augusta) and allowing it to remain in place until July 15, 2014, which will be an unusually long 156 days from the announcement of the hostile take-over bid for Augusta made by HudBay Minerals Inc. (Hudbay). The order was made on the condition that Hudbay's bid is extended to at least July 16, 2014 and a 10-day extension of the bid is provided to shareholders if shares are taken up under the bid.

This decision may signal a modified approach to the regulation of rights plans in Canada.


In April 2013, Augusta implemented a rights plan in response to Hudbay's announcement that it had acquired an ownership position in Augusta of approximately 15 per cent.

Consistent with the requirements of the Toronto Stock Exchange, in October 2013, Augusta held a special meeting at which its shareholders approved the rights plan, with approximately 82 per cent of the shares present (excluding those held by Hudbay) voting in favour (72 per cent of the outstanding shares were voted).

On February 9, 2014, Hudbay announced its intention to make an unsupported offer for all of the shares of Augusta it did not already own. It formally launched its bid the next day.

On March 14, 2014, Hudbay extended the expiry date of its bid and waived the offer's "minimum tender condition". The result of this waiver was that Hudbay would be permitted to acquire any shares tendered to its bid on expiry, regardless of how many shares were tendered, assuming all bid conditions were then satisfied or waived.

On March 28, 2014, Augusta announced that it would voluntarily seek to have its rights plan reaffirmed by its shareholders in the face of Hudbay's offer at its annual shareholders meeting scheduled for May 9, 2014.

Hudbay subsequently announced that it was making a "final extension" of its bid to May 5, 2013, 85 days from the date the offer was announced, and applying to the BCSC to have the Augusta rights plan cease traded to permit it to take up shares under its bid without triggering the Augusta rights plan.

On April 8, 2014, Augusta advanced the date of its meeting to May 2, 2014 to ensure that the vote on the rights plan was conducted prior to the expiry of the Hudbay bid.

On April 14, 2014, after the bid had been outstanding for 64 days with no competing offers publicly arising, Hudbay made an application to the BCSC, Augusta's principal securities regulator, requesting to have the Augusta rights plan cease traded before the scheduled May 5th expiry of its bid.

The hearing on the rights plan was commenced on April 29, 2014, but was adjourned to May 2, 2014.

At the May 2, 2014 shareholder meeting, the Augusta shareholders approved the continuation of the rights plan, with approximately 94 per cent of the shares voted (excluding those held by Hudbay) voting in favour (87 per cent of the outstanding shares were voted).

Later that day, the BCSC completed its hearing on the cease trade application and provided its oral decision, with written reasons to follow.


Prior to the Augusta decision, it is arguable that since 2007 a divergence of views has arisen among Canadian provincial securities regulators in relation to the treatment of rights plans in the context of unsolicited offers.

Historically, Canadian securities regulators have been of the view that unrestricted auctions produce the most desirable outcome for target shareholders. Although the regulators have permitted target boards to use shareholder rights plans to delay unsolicited bids for a reasonable period of time as they seek to maximize value for their shareholders, it typically has been a question of when, not if, a pill must go. Generally, securities regulators have agreed to cease trade rights plans after 50 to 80 days from the announcement of an unsolicited bid.

In the 2007 decision of the Alberta Securities Commission in Pulse Data, as well as the subsequent 2009 decision of the Ontario Securities Commission (OSC) in Neo Material Technologies, the regulators declined an unsolicited bidder's request to cease trade a rights plan after the usual time period and allowed the rights plans to remain in place indefinitely, subject to any further application by the applicable bidder should circumstances change. In both instances, there was no ongoing auction for the target company, but the target's shareholders had approved the rights plan in the face of the unsolicited bid.

The BCSC in its 2010 Lions Gate decision took an approach more consistent with the pre-2007 regulatory approach and affirmed its view that the only appropriate purpose of a rights plan is to enable the target board to seek an improved offer for shareholders, regardless of whether shareholders have approved the rights plan.

Later that year, the OSC clarified its Neo analysis in its Baffinland decision, indicating that Neo did not establish a new basis for upholding a rights plan, but rather that shareholder approval of a rights plan in the face of a specific bid was an important element of its analysis.

In March 2013, the Canadian Securities Administrators (CSA) and Quebec's Autorité des marchés financiers (AMF), which is a member of the CSA, separately published for comment certain divergent proposals, either of which, if adopted, would extend the period during which a target board may rely on a rights plan to defend against an unsolicited offer and reduce the frequency with which securities regulators would be called upon to intervene. For more details on the CSA and AMF proposals, please see our March 2013 Blakes Bulletin: Securities Regulators Propose Alternative Approaches to Defensive Tactics.

Although more than a year has passed since their initial publication, revised proposals reflecting comments received from industry participants have not been published by either the CSA or the AMF, in light of the continuing debate regarding whether target boards or target shareholders should have the final say on the acceptability of an unsolicited offer. Nevertheless, while such proposals are pending, securities regulators in various Canadian jurisdictions have continued to employ a traditional "when, not if, a plan should go" analysis and typically cease traded rights plans 50 to 80 days after a hostile bid has been announced.


In its proposal mentioned above, the CSA expressed concern that an insider bid without a minimum tender condition could be seen to increase the pressure on minority shareholders to tender due to, among other things, concerns regarding reduced liquidity after the bid and the increased control in the hands of the bidder. Presumably, the BCSC had the lack of a minimum tender condition in mind when it required that, in order for the Augusta rights plan to be cease traded on July 15th, Hudbay provide a 10-day extension of its bid if any shares are taken up thereunder.

In addition, unlike in Pulse Data and Neo, in which a rights plan was allowed to remain in place with no specified end date, notwithstanding the overwhelming shareholder support in the face of a hostile bid, the BCSC determined to conditionally cease trade the Augusta rights plan on a specified date. However, such specified date was set significantly in the future – 156 days from the announcement of Hudbay's offer.

It remains to be seen which factors (and the relative weightings thereof) led the BCSC to reach its conclusion. We can presume that Augusta's shareholders' approval of the rights plan in the face of Hudbay's hostile bid was a persuasive factor, particularly given that the BCSC hearing was adjourned until after the shareholder vote occurred. We will have a clearer understanding of the BCSC's rationale when it releases the written reasons for its decision.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.