Shareholder activism has been dubbed "the new M&A"
in recognition of activists' propensity to drive companies to
pursue value-creating transactions. Last month, Bill
Ackman's Pershing Square Capital Management took this trend to
a new level when it teamed up with Quebec-based Valeant
Pharmaceuticals International to orchestrate a hostile takeover bid
for Botox manufacturer Allergan Inc. – a deal valued at over
US$45 billion. A joint vehicle formed between Pershing Square
and Valeant was able to accumulate a strong toehold in Allergan in
advance of Valeant's bid by amassing nearly 10% of
Allergan's outstanding shares without detection. While US
securities law requires investors to disclose holdings exceeding
5%, the joint vehicle used the generous 10-day disclosure window to
continue its accumulation.
Pershing Square is no stranger to activism: in 2012, the New
York-based hedge fund shook up the board of CP Rail in a move that
installed seven new directors in a matter of months. However,
Pershing Square's latest activist maneuver could signal the
beginning of an unusual trend – one that sees deep-pocketed
shareholders joining forces with strategic purchasers to coordinate
takeovers of under-performing companies. Though the approach
is novel, its benefits are clear: strategic purchasers can
capitalize on hedge funds' proven willingness to invest
millions without extensive diligence, and hedge funds stand to gain
hefty returns even if another purchaser steps in to pay a higher
Pershing Square's approach has certainly captured the
attention of Canadian media and the M&A world, but the reality
is that it could not be easily replicated in Canada. Though
Canadian law would not have required disclosure of the 9.7% stake
in Allergan (the Canadian disclosure threshold is set at 10%,
compared to 5% in the US), strict insider trading regulations are
in place that would have made Pershing Square's
strategy more difficult to pursue in Canada. Under
Canadian securities law, any investor who learns of a contemplated
takeover bid from a potential bidder is prohibited from trading on
that non-public information. In order to acquire shares in
advance of a bid in the Canadian context, an activist investor may
actually have to become a joint bidder to comply with applicable
securities law. Industry observers anticipate that Pershing
Square's strategy may spawn similar reform south of the
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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.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan 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.
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