In response to Suncor Energy Inc.'s unsolicited takeover for
Canadian Oil Sands Limited (COS), COS has adopted a second poison
pill that will require Suncor to either double its 60-day
minimum bid period or seek a cease trade order from the Canadian
securities regulators to terminate the pill by Suncor's bid
expiry date. This second poison pill will test whether the
regulators will allow target boards to benefit from an extended
120-day minimum bid period in advance of the implementation of
forthcoming Canadian takeover bid rule changes1.
What You Need To Know
Current bid regime. Under the current rules, a
takeover bid may expire in as few as 35 days. As a result, Canadian
target boards typically implement poison pills prior to, or
following, a hostile bid to provide for more time to seek an
alternative offer or to create leverage to negotiate an improved
offer. Virtually all Canadian poison pills contain permitted bid
provisions that allow a hostile bid to be made without triggering
any dilution to the bidder. A hostile bidder can either choose to
make a permitted bid in compliance with the poison pill or make its
bid conditional on the poison pill being waived by the target board
or terminated by the securities regulators.
Suncor's bid. Suncor's unsolicited
takeover bid for COS is structured as a permitted bid under
COS's first poison pill. The bid is open for acceptance for at
least 60 days and is subject to a minimum tender condition of over
50% of outstanding shares held by the target's independent
shareholders. If this condition is met, Suncor will extend its bid
for a further 10-business day period.
The proposed bid rules. Under Canada's
proposed new takeover bid regime, all non-exempt takeover bids must
be open for shareholders to deposit their shares for a minimum
duration of 120 days (subject to a target board's ability to
shorten the timeframe to as little as 35 days in certain cases).
The proposed bid rules will also allow a hostile bidder to shorten
its bid period if the target enters into a white knight
Transition period. The Canadian securities
regulators have not indicated when the final rules will be
implemented, but we expect the new regime will be in effect early
next year. The existing rules apply to any bid launched before the
new rules become effective.
Looking ahead. The current regulatory
treatment of poison pills typically permits a hostile bidder to
obtain a cease trade order from the regulators terminating a pill
within approximately 45 to 60 days from the date of the hostile
bid. If Suncor chooses not to amend its takeover bid to comply with
COS's second poison pill, it will need to seek a pill cease
trade order from the regulators if it wishes to take up shares at
the end of its 60-day bid period. It will be interesting to see
whether the securities regulators permit COS's second poison
pill to remain in place for 120 days or cease trade the second
poison pill at an earlier time, consistent with existing
1 For background details on the proposed new "just
say slow" takeover bid regime, see Torys' bulletin on
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general guide to the subject matter. Specialist advice should be
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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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