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A ruling in the battle for Augusta Resource Corp. shows that Canadian securities regulators are willing to inject some actual poison into poison pills when shareholders clearly support the anti-takeover measure.
Late Friday, a British Columbia Securities Commission panel declared that Augusta’s shareholder rights plan (or poison pill) should stay in place until July 15. HudBay Minerals Inc. launched a $444-million hostile bid for Augusta back in early February, meaning the regulator gave Augusta more than five months to study its alternatives.
That is an extraordinary amount of time by Canadian standards. Historically, regulators have given hostile takeover targets mere weeks before striking down their poison pills. The pills were treated as a brief delaying tactic while the targets studied their options, and were not viewed as a serious impediment for hostile bidders.
However, that mentality is starting to change. After years of complaints that acquiring Canadian companies is too easy for hostile bidders, the Canadian Securities Administrators have proposed new rules that would allow companies to deploy rights plans for a full year as long as they are approved by shareholders. The plan could then be renewed for another 12 months with a fresh vote.
Vancouver-based Augusta easily won shareholder approval for its rights plan on Friday. The new rules governing poison pills are not decided yet, but the BCSC panel clearly had shareholder support in mind as it granted Augusta a giant extension.
“I’d say we’re pleased with the decision,” Augusta chief executive Gil Clausen said in an interview. “We think the B.C. securities commission made a balanced decision that takes into account the public good and the demands of the shareholders.”
Kevin Thomson, a partner at Davies Ward Phillips & Vineberg LLP who represented Augusta, said the BCSC took a “hybrid” approach with this decision, which recognized that the tide is shifting towards an environment in which shareholders, and not regulators, will decide whether rights plans should hold up.
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