10 | LEXPERT • June 2016 | www.lexpert.ca/usguide-corporate/
ing development on the shareholder activism front.
The changes that have everyone buzzing are the new provi-
sions requiring bidders to keep their offers open for a minimum of
120 days, up from 35 days, and the one forcing companies to offer
a mandatory10-day extension once minimum tender conditions
have been met and they've said they'll be taking up the shares.
"It's a complete game changer, and it's supposed to be a game
changer, because it shis the balance towards the sharehold-
ers and the board to deal with a hostile bid," says Neil Kravitz,
Coordinator of the capital markets group at Davies
Ward Phillips & Vineberg LLP in Montréal.
It may also be a game changer for activists.
Canada is viewed as an activist-friendly regime, at
times drawing high-profile Americans such as Carl
Icahn and Pershing Square's Bill Ackman north of
the border. e new rules may force activists of all
sizes and nationalities to change their tactics, says
Edward Waitzer, a partner at Stikeman Elliott LLP
in Toronto.
"Boards will be able to mount defenses for longer
if they want so activists will probably focus more on
proxy fights and other forms of engagement," he says.
Waitzer, a former chair of the Ontario Securities Commission,
also sees new players emerging on the Canadian activist scene
starting with Canadian institutional investors who, as a group,
have historically remained fiercely private about their battles.
"Institutional investors have been promoting more account-
ability on the part of management and I think that's going to
come full circle," he says. "As public attention focuses more on
gaps in retirement income-security systems within Canada, I
think the level of accountability demanded of them will increase.
ey'll be expected to account for things like whether they're
long-term investors and how they're exercising their proxies, so I
expect that's going to make them more willing to engage directly
with activists."
Waitzer says he has also recently started seeing funds that
specialize in appraisal arbitrage "poking around in Canada."
e funds operate by buying shares of a target company aer
a proposed merger or sale is announced and dissenting on the
grounds the value is too low. ey ask the court to set a fair value
for share prices. If the courts hold that fair value is more than the
buyout price, they get the higher price plus interest at a rate set by
the judge. In the US, interest is normally higher than market rate
— making it a good investment.
"I think the impetus for activists testing the waters on exercis-
ing dissent rights is a natural consequence of them coming up to
Canada generally," Waitzer says. "ey tend to seek and obtain
aggressive advice, and the exercise of dissent rights is a well-devel-
oped product line in the US, which makes sense for them to test
out in the Canadian market.
"My own view is that the legal framework here is less favorable
to dissenters, so I'd be surprised to see this develop significant
momentum. at said, one should never underestimate the
potential for success in aggressive litigation tactics."
Halperin at Goodmans says it's a concern that they're surfacing
in Canada because "it's just another stream of potential transac-
In his mandate letter to the new finance minister, Prime
Minister Trudeau outlined more than two dozen financial prior-
ities. e plan for a cooperative regulator was not among them.
"e former Conservative government was a big, big believer
in a national regulator and really championed this," says
Stephen Halperin, Co-chair of the corporate securities group
at Goodmans LLP in Toronto. "I don't know that it is the same
priority or has the same impetus under the Liberal government."
It may just be that the new government has other fish to fry
early in its first mandate, he says. Still, the cooperating provinces
can't do this without Ottawa.
e sentiment on Bay Street – Canada's Wall Street – remains
"overwhelmingly supportive" of the plan.
"at's an Ontario view," says Halperin, who is based in
Toronto. "You get a different view in the oil patch. Alberta's new
government has said flat out it's not interested in participating.
But on the Street, the people I deal with at the Bar and in the
banking and investment communities think it's ridiculous we
don't have a national regulator."
Kent Kufeldt, Regional Leader of the corporate and capital
markets group at Borden Ladner Gervais LLP, says from his
Calgary office that the proposed cooperative model raises some
difficult questions.
"How are the various cooperating parties going to deal with
each other — and how are they going to cooperate with those
provinces that are not in?" he asks. "ere's going to be an adjust-
ment phase for how they're going to administer it. at could
lead to uncertainty and delay."
Kufeldt, who also works out of his firm's Vancouver office,
believes the current "passport" system works well, and says there
is concern that issuers not suffer in any potential change.
"In situations where you need to engage with securities
commissions for relief from regulatory requirements, are they
going to have a consistent approach? Are they going to take longer
to arrive at decisions because they've got a new system in place?
"You're going to have a period of adjustment for sure as they
figure it out, and that could impact timing on transactions where
you need to engage with regulators, where you need regulatory
relief of certain provisions."
In the meantime, the absence of a national regulator hasn't
held the provinces back from a sweeping overhaul of the country's
take-over regime. It was done through the Canadian Securities
Administrators (CSA), an umbrella group of provincial and terri-
torial regulators.
One of the major changes they adopted may lead to an interest-
"The former Conservative
government was a big, big believer
in a national regulator and really
championed this. I don't know
that it is the same priority
or has the same impetus under
the Liberal government."
Stephen Halperin
Goodmans LLP
SECURITIES
