LEXPERT MAGAZINE
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NOVEMBER/DECEMBER 2017 69
| TACTICAL PRIVATE PLACEMENTS |
treatment of private placements in either
case should differ fundamentally from
each other," Sunstrum says. "On the other
hand, Eco doesn't do the same kind of bal-
ancing that we saw in Dolly Varden, and it
remains to be seen precisely how the
OSC
will deal with the public interest question
in the proxy context."
What seems apparent, however, is that,
if private placements are more likely to sur-
vive scrutiny in the proxy context, proxy
fights could become a more common way
of seeking control, especially "negative
control" (where a shareholder maintains
voting control without equity ownership).
So far, that hasn't happened, likely because
regulators haven't clarified their approach.
"I suspect that Eco is just chapter one in the
proxy story," Sunstrum says.
Meanwhile, a widespread belief that the
new regime would deter hostile bids hasn't
panned out. According to a study by Lau-
rel Hill, a proxy solicitation firm, the seven
hostile bids that occurred in the year fol-
lowing the regime's inception mean that
Julius Melnitzer is a freelance
legal-affairs writer in Toronto.
THINKING OUTSIDE THE BOX
Private placements and poison pills aren't the only defence tactics
Private placements and poison pills aside, Walied Soliman at Norton Rose Fulbright Can-
ada LLP believes there are still many ways in which companies can put themselves in
the best position possible during a hostile bid. "Lawyers and advisers who say that there
is no way for issuers to protect themselves against agitators or hostile acquirers in the
context of the new hostile bid regime are either not thinking out of the box or confining
their thoughts to narrow historical tools that didn't make too much difference in Canada in
any event," he says. "It's just a question of … reflecting on who the potential acquirers or
agitators might be, what they might be looking for, and what the company can do in a re-
sponsible fashion to ward them off while preserving shareholder value at the same time."
By way of example, Soliman notes that boards may be able to issue dividends at appro-
priate levels, reduce cash on hand or take on debt that will make a company less of a tar-
get or less economically viable, especially for acquirers who need to leverage the balance
sheet in order to finance the acquisition. Boards can also decide to invest in acquisitions of
their own that make it more difficult for specific buyers or agitators to target the company.
Or they may wish to sell off divisions that reduce the company's attractiveness, which is
something that can be done without a shareholder vote under Canadian law.
But as Chris Sunstrum at Goodmans LLP points out, these options are "incredibly"
fact- and context-specific. "You need the right asset, the right potential buyer and the right
investors," he says.
activity was "effectively unchanged" from
recent years.
Whether the environment will remain
stable remains to be seen. But it may be
seen soon: Eco has appealed the OSC's de-
cision to the Ontario Divisional Court.
