52 LEXPERT MAGAZINE
|
MARCH 2016
| CONTESTED M&A |
WHAT IS CLEAR is that whether the mini-
mum period turns out to be 90 or 120 or
some other number of days, the proposed
changes will effect a significant change in
the landscape for hostile bids.
"We won't be seeing as many tactical
pills, both because shareholders will get
used to the longer period and because it
will be some deterrence to hostile bids in
general," says William Gula of Hansell
LLP in Toronto.
e changes, if enacted, will represent a
meaningful adjustment between the power
of boards and the power of shareholders.
"ey will also represent a fairly clear stan-
dard that will result in regulators stepping
out of the fray and removing themselves as
arbiters as to when rights plans fall away,"
says Matthew Cumming of McCarthy Té-
trault LLP in Toronto.
Indeed, Neill May of Goodmans LLP
in Toronto believes that the changes to the
take-over regime will push M&A activity
into proxy contests. "ere's a historical
awkwardness in Canada that arises from
securities regulators touching on issues,
like fiduciary duties, that would better be
dealt with by the courts," he says. "Under
the new regime, the issues giving rise to this
awkwardness will more likely be played out
in proxy contests and, if necessary, resolved
in court."
For many, any measures that restrain
regulators' involvement are a good thing.
"I've never been a huge fan of securities
commissions' getting in the way of how
companies are run in the so-called interests
of shareholders because the truth is that it's
really hard for most shareholders to be as
bid approaches and there are
extraordinary circumstances."
BUT UNDERMINING the effi-
cacy of poison pills won't com-
pletely dilute the historical
tension between judges, who
have been prone to give boards
a liberal hand on the basis of
the business judgment rule,
and securities tribunals, which
tend to be less deferential to
directors of a company.
"e proposed amend-
ments do not address broader
defensive tactics that are avail-
able to targets, and securities
commissions will still have to
deal with these," Cumming
points out. "I don't see securi-
ties commissions abandon-
ing their role, for example, in
determining whether private
placements to white knights
are legitimate, nor do I see
them pulling back on their
tendency to invoke their
public-interest jurisdiction to
override directors' decisions."
Otherwise, applications for
exemptions from the 50 per
cent minimum tender bid re-
quired by the proposed amendments may
flourish, filling the hearing void potentially
le by a prescriptive bid period. "e 50
per cent requirement doesn't always make
sense, and I believe the regulators want to
have some discretion in those types of situ-
ations," Tomchak says.
en, of course, there's the uncertainty
created by the fact that the various provin-
cial securities regulators have been less than
consistent in their approaches to defensive
tactics and the parameters of their respec-
tive public-interest jurisdictions.
"e British Columbia Securities Com-
mission, for example, is more likely to kill
a pill faster than the Ontario Securities
Commission, and the Alberta Securities
Commission is even harder on pills than
the BCSC," Tomchak says.
Contrasting decisions by the Québec
Bureau de décision et de révision (subse-
quently upheld by the Québec Court of
Appeal) in AbitibiBowater inc. c. Fibrek
inc. and by the British Columbia Securities
informed as the board is in determining a
company's worth," says William Ainley in
the Toronto office of Davies Ward Phillips
& Vineberg LLP.
Ainley, not surprisingly, is no fan of
prescriptive bid periods at all. As a case
in point, he cites Toronto-based WiLAN
Inc.'s (ultimately unsuccessful) $480-mil-
lion hostile bid for rival patent licensing
company Mosaid Technologies Inc. in
2011. "In a situation like that, where bid-
ders have to review thousands of patents to
determine value, it makes no sense to im-
pose a definitive period at all," Ainley says.
Still, if a prescriptive regime is inevitable,
Ainley does have a preference. "e 35 days
we have now is too bidder-friendly, 45 days
is too short because there are many cases in
which value wouldn't surface, and 120 days
is too long because there aren't many fi-
nancing commitments that would hold for
that period of time," he says. "Ninety days
would probably be best, but even 120 days
would be an improvement on the rights
plan hearing game that exists now."
Teresa Tomchak of Farris, Vaughan,
Wills & Murphy LLP in Vancouver also
favours 90 days. "I think we're going to get
120 days, but I also believe that 90 days
makes more sense," she says.
e consensus seems to be that the lon-
ger the minimum bid period, the rarer
poison pill hearings will become. "I do
think that it will be very hard to get an
exemption from the 120-day period, if
that's the period the CSA implements,"
Tomchak opines. "Pills, and the hearings
that oen accompany them, are going to
be appropriate only when the expiry of the
"THE 50%
requirement doesn't
always make sense,
and I believe the
regulators want to
have some discretion
in those types
of situations."
TERESA TOMCHAK FARRIS VAUGHAN, WILLS & MURPHY LLP
