On March 31, 2015, the Canadian Securities Administrators (the
CSA) published proposed amendments to Canada's
take-over bid regime (the Proposed Amendments)
under Multilateral Instrument 62-104 – Take-Over Bids and
Issuer Bids, other related instruments and the Ontario
Securities Act. The Proposed Amendments will be open for
comment until June 29, 2015.
There are three key features of the Proposed Amendments
affecting non-exempt take-over bids:
120 Day Requirement. Take-over bids must
remain open for a minimum deposit period of 120 days (the
120 Day Requirement) (as opposed to the current 35
day timeframe) unless (i) the target board states in a news release
an acceptable shorter deposit period (provided that it is not less
than 35 days); or (ii) the target announces that it has entered
into an "alternative transaction", in which case the
original take-over bid will be subject to a shorter 35-day minimum
Minimum Tender. Bidders must receive tenders
of more than 50 per cent of the outstanding securities that are
subject to the bid (excluding securities owned by the bidder itself
or its joint actors).
Mandatory Extension. The bid period must be
extended by 10 days after a bidder has received tenders of more
than 50% of the outstanding securities. The purpose of this
requirement is to provide target shareholders who did not initially
tender their shares the opportunity to take-up the offer after the
bid crosses the minimum tender threshold.
The purpose of the Proposed Amendments, the CSA states, is to
"provide target boards with sufficient time to respond to
hostile bids, while facilitating the ability of target shareholders
to make voluntary, informed and co-ordinated tender
We expect that if adopted, the 120 Day Requirement will result
in a reduction in hostile take-over bid activity, if for no other
reason than the fact that bidders will be wary of committing
themselves to a fixed acquisition price over a 120 day period. Such
proposition makes less sense in a commodities driven economy where
share prices can fluctuate significantly over short periods of
time. As well, the 120 Day Requirement will increase the likelihood
that a competing bid will be tabled, another risk that a hostile
bidder must consider. As a corollary, we think we would see an
uptick in the number of proxy contests being waged in the markets,
a seemingly safer avenue through which to seek board control and
increase shareholder value. We can also expect to see an increase
in the use of hostile M&A tactics, including closed-door
bullying and bear hug offers (an offer of a price much higher than
fair market value is made in order to restrict the target's
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