Lexpert Magazine

LEXPERT MAGAZINE | NOVEMBER/DECEMBER 2017 67 | TACTICAL PRIVATE PLACEMENTS | it had under the old one. "Dolly Varden has resolved some of the confusion that had developed in the jurisprudence," Olasker says. "e decision knits all the princi- ples together in a way that makes them coherent and sets out a pro- tocol for approaching the issue." Hecla Mining's hostile take- over bid for Dolly Varden in early July 2016 was the first contested transaction since the new regime came into force. But about a week aer Hecla made its intentions public, and three days before the takeover bid was launched, Dolly Varden announced that it would be seeking a private place- ment that could, as a side effect, discourage the takeover. Hecla sought cease-trade orders from both the Ontario Securities Commission (OSC) and the Brit- ish Columbia Securities Com- mission (BCSC). Following a joint hearing, the OSC and the BCSC both dismissed the cease-trade appli- cations. In reasons released in October 2016, they ruled that Dolly Varden's need for financ- ing was genuine and immediate and that the private placement was not a defensive tactic by any measure. In so concluding, the panels placed considerable emphasis on the fact that Dolly Varden had been considering an equity financing before Hecla's bid emerged. "So if a company is in the pro- cess of raising money, and espe- cially if it has a process in place, it will likely not be derailed just because a hostile bidder has emerged," Frai- berg says. "On the other hand, if no process is in place, regulators will look at the place- ment more skeptically." The regulators also ruled that determining the validity of a private place- ment involved a balance between the share- holders' right to determine whether to accept the bid and a board's business judg- ment. is balance, in turn, required a con- sideration of a number of factors including: the efficacy of private placements as tactical tools in the context of hostile bids: Hecla withdrew its bid almost immediately aer the Commissions released their orders. At the same time, the decisions circum- scribe the availability of the strategy. "Dolly Varden makes it clear that regulators will not allow private placements to stand in the face of the core principle that shareholders should be allowed to choose," Woollcombe says. "at leaves boards with very little in the way of defensive tactics, but that's what an inquiry into whether the private place- ment provided other benefits to the target's shareholder, such as funding for operations during the bid period; the impact of the placement on shareholders' right to tender; the participation of related or similar par- ties in taking up the placement; the target shareholders' views about the bid and the placement; and whether the board ad- equately balanced the private placement's benefits and its impact on the bid. If nothing else, the decisions established PHOTO: SHUTTERSTOCK

• cover
• front
• big