Canada: TSX Overruled — OSC Requires Approval Of Hudbay Shareholders In Proposed Acquisition Of Lundin

The Ontario Securities Commission (OSC) recently exercised its seldom-used statutory right to review decisions of the Toronto Stock Exchange (TSX) and overturned a TSX decision. The OSC issued an order requiring HudBay Minerals Inc. to obtain the approval of the HudBay shareholders prior to proceeding with the issuance of HudBay common shares in connection with the proposed acquisition of Lundin Mining Corporation. The TSX's Listing Committee had previously determined that it would not require HudBay to obtain shareholder approval in granting listing approval for the HudBay common shares to be issued to Lundin shareholders as consideration for the acquisition. The OSC released brief reasons for its ruling on January 23, 2009 and issued full reasons on April 28, 2009.

On November 21, 2008, HudBay and Lundin jointly announced a business combination transaction pursuant to which HudBay would acquire all of the outstanding Lundin common shares on the basis of 0.3919 HudBay common shares for each Lundin common share. The proposed transaction was structured as a plan of arrangement of Lundin under the Canada Business Corporations Act that would require approval by Lundin's shareholders (but not HudBay's shareholders). This approval was obtained ata Lundin shareholders' meeting on January 26, 2009. The completion of the proposed transaction would dilute the existing HudBay shareholders by just over 100 per cent and would result in the existing shareholders of HudBay and Lundin each holding approximately 50 per cent of the combined entity.

The TSX Company Manual requires that a listed issuer obtain securityholder approval for the issue of securities as consideration for an acquisition where the number of securities issued or issuable in payment of the purchase price exceeds 25 per cent of the issued and outstanding securities of the listed issuer. However, this requirement does not apply where the listed issuer is acquiring a public company. Where a listed issuer proposes to acquire a public company, the TSX Company Manual requires securityholder approval of a transaction if, among other things, in the opinion of the TSX the transaction materially affects control of the listed issuer. The TSX Company Manual also provides the TSX with discretion to impose conditions on a transaction, having regard to the effect the transaction may have on the "quality of the marketplace."

In reversing the TSX's decision, the OSC concluded that the "quality of the marketplace" would be significantly undermined by permitting the proposed transaction to proceed without approval of the HudBay shareholders. Thefactors considered by the OSC included:

  • Impact of the transaction on shareholders of HudBay — The OSC noted the precipitous 40 per cent decline in the HudBay share price following announcement of the transaction.
  • Level of dilution — The OSC viewed the 100 per cent dilution as "extreme" and concluded that the transaction was more a "merger of equals" than an acquisition by HudBay of Lundin. The OSC observed that this level of dilution would fundamentally change the voting, distribution and residual rights of the current HudBay shareholders.
  • Board of the merged entity — The board of HudBay would be substantially reconfigured as a result of the transaction, and the OSC believed that the shareholders of HudBay were being subjected to a "radical change" in board composition without their consentor concurrence.
  • Timing of shareholder votes — The OSC voiced concern with the timing of theLundin shareholders' meeting and a HudBay shareholders' meeting that had been requisitioned to replace the HudBay board. The OSC noted that if the transaction had been completed before the requisitioned HudBay shareholders' meeting, the purpose of that meeting would have been frustrated.

The OSC focused primarily on the fair treatment of the HudBay shareholders and concluded that the HudBay shareholders should be afforded the right to determine (by simple majority approval at a special meeting) whether the proposed transaction should proceed. The OSC's decision goes on to expressly emphasize the OSC's view that the fair treatment of shareholders is a key consideration going to the integrity and qualityof our capital markets.

McCarthy Tétrault Notes:

The TSX is currently reviewing its rules with respect to the requirement for shareholder votes in share-for-share merger transactions where a listed issuer seeks to acquire another public company. It is quite likely that a new rule will be adopted, probably similar to the rules already in place at other stock exchanges, requiringa shareholder vote when the dilution to be suffered by the acquiring company's shareholders exceeds some threshold level. The TSX issued a draft rule for comment on April 3, 2009, which proposed a 50 per cent dilution threshold. This stands in contrast to the requirement under NASDAQ and NYSE rules that are applicable for acquisitions that will result in dilutionover 20 per cent.

In the meantime, M&A advisors should carefully consider the impact on the "quality of the marketplace" that could result from the terms of any proposed acquisition of a public company by a listed issuer by way of a securities exchange. They should also be mindful of the possibility of securityholder approval being imposed as a condition to the listing approval of the buyer's additional securities. A listed issuer buyer can no longer be certain that securityholder approval will not be required in connection with its acquisition of a public company for share consideration. And a public company target will need to factor in deal certainty risks associated with being acquired by a listed issuer for share consideration. In addition, the OSC has spoken of the need for fair treatment of shareholders, perhaps signalling the OSC's receptiveness to future fairness complaints for activist shareholders.

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.

In association with
Related Topics
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