In two months the recently published amendments towards the country’s take-over bid regime will require effect.
For some observers the key changes C the 105-day minimum deposit period, the minimum target condition and the mandatory 10-day extension – strike an account balance between your 120-day original proposal and comments received by the regulators.
A recent report prepared by Stikeman Elliott said the alterations are “aimed at providing target boards with an increase of time for you to respond to takeover bids and look for value-maximizing alternatives while facilitating shareholders’ ability to make voluntary, informed and coordinated tender decisions without coercion.
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While the new rules “ostensibly obviate the need for shareholder rights plans,” the report argues that poison pills “may nonetheless continue to be a tool in the hands of target boards, albeit in additional narrow and particular circumstances.”
For its part, Norton Rose had a different take. Inside a recent report, it argues the amendments “may result in the increased use of proxy fights and bully M&A tactics by acquirors to effect acquisitions of commodity issuers.”
One reason for that view is the fact that under the new rules the so-called off-ramps will not be available. The report C written by Walied Soliman, Orestes Passparakis and Trevor Zeyl C defines off ramps because the “multiple” opportunities available underneath the current rules for bidders to withdraw their bids, including 35 days after launching their offer.
Because those chances to get from the highway are no longer available C instead bidders will be required to leave their fully financed fixed price bids open for 105 days C potential buyers may be loath to acquire a company in the commodities business. The main reason: Commodity issuers are susceptible to volatile fluctuations in share prices over short amounts of time,
Indeed the trio of lawyers write they’ve already found a way for a prospective acquirer “to avoid the application of the brand new and much more onerous take-over bid regime.”
How can that be achieved? The potential acquirer can employ “more traditional” activist tactics to effect an acquisition. And also the three C who’ve been major players in hostile bids and proxy fights Cargue tithe acquirer includes a bag of tricks to employ: it might run agitation campaigns, it could start proxy fights, or it might use bully M&A tactics.
One such bully tactic is something known as a bear hug letter, in which a shareholder (with a under 10 per cent stake) or an agent from the shareholder calls on the target to go over matters, one of these could be a merger or purchase using the ultimate goal being. The ultimate goal is perfect for the possibility acquiror, “to sweep the prospective into as firm an embrace as you possibly can, the so-called “bear-hug” letter,” wrote Graham Gow from McCarthy Tetrault.
In viewing three Norton Rose lawyers, such tactics C which are intended to limit the options available to the prospective – offer “a seemingly safer avenue through which an acquiror can influence a board or seek board control and ultimately effect an acquisition in possibly a far more efficient and cost-effective manner.”
The lawyers note the regulators had anticipated such a potential outcome. “While the Amendments clearly give target boards incrementally greater leverage in a hostile or unsupported context than the existing regime -there are multiple ways that acquirers can achieve “hostile” acquisitions under Canadian corporate law.”
bcritchley@nationalpost.com
