The Canadian Securities Administrators (CSA) yesterday published
for comment proposed amendments to the Canadian take-over bid
regime that, if implemented, would significantly change the
dynamics, timeline and processes for contested take-over bids.
The key elements of the new proposals would materially change
the way unsolicited take-over bid transactions occur in Canada by
(i) significantly lengthening the minimum deposit period to 120
days, subject to abridgment in certain circumstances, thereby
providing target boards with much more time to respond to an
unsolicited bid, including by seeking alternatives or convincing
shareholders to reject the bid, and (ii) imposing requirements,
specifically a minimum 50% tender condition and a requirement to
extend the bid for at least ten days once the bid conditions are
met, which will reduce the potential for coercive bids. These
changes would effectively impose, as a minimum statutory standard
for take-over bids in Canada, an enhanced form of the
"permitted bid" concept commonly included in shareholder
rights plans adopted by Canadian public companies.
The proposals are substantially based on the concepts announced
on September 11, 2014 (see our September 12, 2014 Update, CSA
Propose Different Direction for Take-Over Bid Regime). The
90-day comment period on the proposed amendments ends on June 29,
The CSA's proposed amendments to the take-over bid regime
would impose the following requirements for all non-exempt
Mandatory Minimum Tender Requirement. All bids would
be subject to a minimum tender requirement, under which more than
50% of all outstanding target securities subject to the bid owned
or held by persons other than the bidder and its joint actors would
need to be tendered and not withdrawn before the bidder can take up
any securities under the bid. The adoption of a requirement that a
majority of independent securityholders accept a bid would mitigate
the pressure to tender that can arise under the current framework,
where a bidder can waive a bid without a minimum tender condition
impelling securityholders to tender lest they be left holding
securities of a controlled issuer.
Mandatory Deposit Period After Satisfaction of Minimum
Tender Condition. All bids would have to be extended for 10
days if, after the expiry of the initial deposit period, the
minimum tender requirement is satisfied and all terms of the bid
have been complied with or waived. The bidder would be required to
issue and file a news release, with specified information,
concurrent with the commencement of the mandatory 10-day extension
period. This requirement too would mitigate the pressure to tender
in circumstances where target securityholders have to make tender
decisions without knowing what other securityholders have done and
whether the bid will proceed.
Minimum 120-Day Bid Period (Unless Abridged by the
Target). All bids would have to remain open for at least 120
days unless the target board agrees (in a non-discriminatory
manner, when there are multiple bids) to a minimum period of at
least 35 days or the target issues a news release announcing that
it has agreed to enter into certain alternative transactions.
The proposed amendments also include additional and
consequential technical changes to related aspects of the take-over
bid regime, including the rules governing variations to bid terms,
changes in information, and the mechanics and processes for take-up
and payment for shares and withdrawal rights.
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.
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