IIAC Blog

March 4, 2016

A ‘Win’ for the IIAC – Take-Over Bid Rules (IIAC Blog)

Ian Russell

Ian Russell

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In Canada, a company’s board of directors cannot reject a hostile bid without first giving shareholders their say.

In March 2015, the Canadian Securities Administrators (CSA) had proposed changes to Canada’s take-over bid regime to level the playing field between bidders and target boards and to provide additional protection to the existing shareholders of the target company.

The proposed rules would have substantially extended the period during which a take-over bid must remain open, from the current minimum of 35 days to 120 days. The IIAC said the current minimum deposit period is arguably too short to allow target boards to properly evaluate unsolicited bids, negotiate with a hostile bidder or seek out competing bids, but the IIAC stressed that a longer, 120-day bid period may act as a deterrent to bidders in that there are additional costs involved with cash considerations being set aside for a longer period of time. There is also the risk that competing transactions may be identified and accepted by the target company’s board of directors. The IIAC proposed a 90-day bid period. The CSA settled on 105 days.

Additionally, the bids will be subject to a mandatory minimum tender requirement of more than 50% of the outstanding class of securities subject to the bid. There is also a mandatory 10-day extension to the bid period after the tender condition is satisfied. The IIAC supports both of these conditions.

The changes are effective May 9, 2016.

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