This week, the Canadian Securities Administrators (CSA) published draft rules under which a takeover bid would have an irrevocable 50 percent minimum tender condition. Once met, the rules would require an additional 10-day right to tender for undecided shareholders.
The bid, however, would also remain open for a minimum of 120 days. The 50 percent condition is laudable, because it offers effective decision-making capacity on the part of shareholders. The 120-day requirement, however, would cause uncertainty in the market, to the detriment of target shareholders, and of bidders.
The CSA proposal seeks to strike a balance that might lessen the prominence of litigation relating to shareholder rights plans or “poison pills.” The bidder must obtain a “majority of minority” approval before it can take up shares; securities of the bidder and its joint actors would not be counted in the 50 percent. The advantage is that a minority of shareholders cannot force the majority to sell control.
Anita Anand – Special to Financial Post – April 1, 2015
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