The Alberta Securities Commission (ASC) has allowed Canadian Oil
Sands Inc. (COS) to keep its tactical poison pill in place until
January 4, 2016, a period of 90 days from the commencement of
Suncor Energy Inc.'s unsolicited takeover bid for COS. While
this period exceeds the typical time that Canadian securities
regulators have previously allowed poison pills to remain in place,
the ASC decision effectively denied COS from the benefit of a
120-day minimum bid period in advance of the implementation of
takeover bid rule changes in Canada.
What You Need To Know
The regulator chose not to allow COS to take advantage of a
120-day minimum bid period that is expected to become the new
minimum bid period for takeover bids in Canada under proposed rule
changes (subject to a target board's ability to shorten the
timeframe to as little as 35 days in certain cases). The new rules
are expected to become effective in early 2016.
Until the new takeover bid rules are implemented, target boards
will continue to have to justify how much time they require to
evaluate and respond to a hostile bid and they should assume that
they will get considerably less than 120 days.
From the bidder's perspective, complying with a 60-day
permitted bid provision in a target's existing poison pill is
unlikely to shield it from the risk that the target will implement
a second poison pill with a longer permitted bid period.
Background and Analysis
Background. On October 5, Suncor made an
unsolicited takeover bid for COS that was structured as a permitted
bid under COS's first poison pill which had been approved by
COS's shareholders. The bid was open for acceptance for at
least 60 days (until December 4, 2015) and was subject to a minimum
tender condition of over 50% of outstanding shares held by the
target's independent shareholders.
On October 7, COS adopted a second poison pill which had not
been approved by COS's shareholders and contained a 120-day
permitted bid period. Suncor commenced regulatory proceedings to
have the second pill terminated before the expiry of its bid.
Analysis. COS's 120-day permitted bid
provision in its second pill was consistent with forthcoming
changes to the takeover bid regime in Canada.1 One of the primary
reasons for the proposed 120-day minimum bid period was to address
the concern of some market participants that target boards in
Canada do not have sufficient time to respond to hostile bids.
However, the ASC chose not to provide COS with the benefit of the
proposed 120-day minimum bid period, or to allow Suncor to take up
tendered shares on the expiry of its 60-day bid. Instead, the
regulator sought a middle ground by providing COS with 90 days to
consider and respond to Suncor's offer―this timeframe is
longer than the typical period of 45 to 60 days in which regulators
have previously cease traded poison pills, but falls short of the
full 120-day period that COS was seeking.
The ASC's decision is consistent with the British Columbia
Securities Commission recent approach to early adoption of the new
takeover bid rules when it decided to cease trade CB Gold
Inc.'s poison pill following Red Eagle Mining Corporation's
unsolicited takeover bid for the company. In that decision, the
B.C. regulator also did not consider itself bound by the draft new
bid rules which are not yet effective.
The ASC's decision means target boards will have to wait
until the new bid rules are implemented before they can receive the
benefit of 120 days to evaluate and respond to a hostile bid. Once
the new regime takes effect, we would expect that the regulators
would not generally permit a target board to maintain a poison pill
beyond 120 days if a bid has been accepted by a majority of
disinterested shareholders and it otherwise complies with the new
takeover bid rules.
further details on Canada's new "just say slow"
takeover bid regime, see Torys' bulletin on Torys.com
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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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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