Canada: Financing An Unsolicited Bid: New Bid Regime Changes Financed Bid Landscape

As noted in our earlier Osler Updates, 2016 saw significant changes to the Canadian take-over bid regime that substantially impacted unsolicited take-over bids. As take-over bids, unlike plans of arrangement or other corporate transactions, cannot be subject to a financing condition, the overhaul of the take-over bid regime has meaningful implications for financed transactions.

Overhaul of the take-over bid regime

Under the amended take-over bid regime, all non-exempt take-over bids (including partial bids) are subject to the following requirements:

  • a 50% minimum tender requirement;
  • a 10-day extension requirement following satisfaction of all conditions; and
  • a minimum 105-day tender period, subject to acceleration in certain circumstances to no less than 35 days.

The main impact of the changes to the take-over bid regime is to significantly extend the time required for unsolicited take-over bids to be outstanding. Whereas under the old regime, a bid could be outstanding for as little as 35 days, absent support from the target company's board of directors, under the new regime: 1) a bidder can't take-up under the bid until at least 105 days after launch of the bid, and 2) a bidder is required to effect a second take-up no earlier than 115 days after the launch of the bid.

Financing a bid

Under applicable Canadian securities laws, a bidder seeking to effect a take-over bid (whether unsolicited or board-supported) must make adequate arrangements before launching the bid to ensure that the required funds will be available to make full payment for the securities that are the subject of the bid. The financing arrangements may only be subject to conditions that the bidder reasonably believes the possibility to be remote that, if the conditions of the bid are satisfied or waived, the offeror will be unable to pay for the securities deposited under the bid due to a financing condition not being satisfied. In effect, the take-over bid can't be subject to a financing condition.

In practice this has meant that bidders making a financed cash take-over bid must secure binding commitment letters from the bidder's financing sources that are subject only to limited conditionality (consisting generally of conditions that mirror those that are part of the terms of the bid, as well as conditions that are within the bidder's control).

While financing commitment papers provide generally firm commitments from a lender to ensure that the bidder has sufficient financing available to satisfy the bidder's obligations, financing commitment papers impose obligations on the bidder and can limit its strategic options.

In particular, commitment letters:

  • have outside dates for, among other things, the entering into of full credit documents (i.e. a credit agreement), the initial draw under the credit agreement and the obligations of the lender or lenders under the commitment letter;
  • require the payment of significant fees to lenders – commitment fees, duration or ticking fees, bridge financing fees and other fees; these fees depend on, among other things, the size of the loan, the duration of the commitment and the leverage of the bidder; and
  • impose covenants on the bidder with respect to the completion of the acquisition, including with respect to the bidder's ability to waive any condition that adversely affects the lenders.

It is also typical for lenders to require that the take-over bid will result in the bidder acquiring at least 66 2/3% of the outstanding shares of the target and complete a subsequent going private transaction so that there is a path (under a corporate law second-step acquisition transaction) to acquiring all of the outstanding shares of the target. Once a bidder holds at least 66 2/3% of the outstanding shares, there is generally certainty that the bidder will end up owning all of the target's outstanding shares. It is at that point simply a question of time to implement the subsequent acquisition transaction. Lenders need visibility on how the bidder intends to achieve 100% ownership of the target, as this allows the lenders to obtain security over the target's assets.

Impact of the new bid regime on financing

The new take-over bid regime can be expected to have implications for financing commitments. Among other things:

  • with a minimum period for an unsolicited take-over bid of 105 days, bidders and lenders need to resolve a competing tension between bidders wanting a financing commitment for a sufficient period of time that will allow them to complete the take-over bid (minimum of 115 days, assuming it remains unsupported throughout the tender period) and any subsequent acquisition transaction. Lenders generally want to limit the commitment period to limit their exposure to changing rate environments, and a longer commitment period exposes lenders to fluctuations and instability. In light of a 115-day minimum bid period and the need to provide for a second-step transaction and some additional flexibility in the transaction timetable, the required commitment period under the new bid regime for an unsolicited bid is likely to be around six months, given the need for certainty of funding through the time period necessary to complete a second-step transaction;
  • this increase of the minimum tender period by at least 80 days (as compared to the prior bid regime) significantly increases the costs of financing in an unsupported/unsolicited take-over bid. In addition to having commitment fees being potentially at a higher rate (due to the longer commitment period), ticking fees which are payable to compensate lenders for their commitment from the date the commitment letter is signed to the earlier of the closing date and expiration of the commitment will likely be payable for a longer period;
  • with the longer commitment period, it is also likely that lenders will insist on broad "flex" language in the commitment papers to permit them to change the amount, pricing, structure, yield, tenor, conditions and other terms of the financing if necessary to complete a successful syndication; and
  • as detailed further below, the timeline for negotiating and finalizing credit documents may change and bidders will need to keep their lenders up to speed on the status of the take-over bid and likely timing to ensure the financing documents are finalized when needed (on expiry of the bid or if the bid becomes supported by the target board).

As a practical matter, a longer bid period also creates the potential for uncertainties around documenting credit arrangements. Under a take-over bid subject to a 35-day bid period, financing lawyers would generally begin preparing and negotiating definitive credit documents immediately following the launch of the take-over bid. However, under a take-over bid with a 105-day minimum bid period (i.e., one that remains unsupported throughout the pendency of the bid), funding would not be required until at least 105 days after launch. If the conditions were not all satisfied or waived at that date, the initial funding date could be significantly longer. Given the cost of preparing credit documentation and related security, the longer bid period could result in delayed preparation of the credit documents as bidders may not want to incur the costs of negotiating the credit documents prior to the end of the bid period.

However, if at any time the unsolicited take-over bid turns friendly as a result of a favourable recommendation of the target board, the 105-day bid period can be accelerated to as little as 35 days (including the time period already passed). As such, if the bidder, the lender and their respective financing legal teams are not prepared for the transaction to become supported or are not "kept up to speed," there could be significant pressure on the financing teams to generate the necessary documents to permit an initial funding.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions