As of today, new takeover bid rules have taken effect across Canada. These new rules will undoubtedly have a significant impact on the Canadian mining sector, which accounts for approximately 40% of the number of listed companies on the Toronto Stock Exchange and TSX Venture Exchange.
The new rules are intended to enhance the quality and integrity of the takeover bid regime and rebalance the dynamic between bidders, target boards and target shareholders by facilitating target shareholders’ ability to make voluntary, informed and coordinated tender decisions; and providing target boards with additional time and discretion when responding to a takeover bid.
The key aspects of the new rules are:
• Bids must now be open for at least 105 days (up from 35 days) unless the target board (a) states in a news release that a shorter deposit period (not less than 35 days) is acceptable, or (b) has agreed to enter into, or determined to effect, an alternative transaction, in which case all contemporaneous takeover bids must remain open for a deposit period of at least 35 days.
• A new minimum tender condition that acts as a de facto minority vote on any deal since a bid must receive tenders of more than 50% of the outstanding securities of the class that are subject to the bid, excluding securities owned by the bidder and a related requirement to extend a bid for an additional 10 days if the 50% condition is satisfied and all other terms and conditions of the bid have been met or waived.
As intended, the new rules significantly shift leverage from hostile bidders to target directors and shareholders. Some of the likely impacts of the new rules include:
• Hostile bids are harder — The longer bid period enhances the ability of target boards to locate potential white knight bidders or recommend to shareholders that they reject the hostile bid. The longer bid period should also make it more difficult or expensive for bidders to obtain financing.
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