CANADA Law and Practice Contributed by: Kevin West, Andrea Hill, Priya Ratti and Gabriel Potkidis, SkyLaw
6.6 Requirement to Obtain Financing In an arrangement, amalgamation and other business combinations, there is no regulatory requirement or restriction on financing conditions. However, the target will generally require that the acquiror show evidence that it will be able to fund the cash consideration. For takeover bids that offer cash consideration, the bidder must have adequate financing arrangements in place before commencing the bid to ensure that the required funds are available to make full payment. The financing itself may be conditional at the time the bid is commenced, if the bidder reasonably believes that the possibility is remote that it will not be able to pay for securities deposited under the bid. 6.7 Types of Deal Security Measures Acquirors may seek a wide variety of deal protection measures, examples of which are described as fol - lows. Support Agreements and Lock-Ups In a friendly takeover, before launching the bid, the bidder and the target may enter into a support agree - ment whereby the target agrees to recommend that its shareholders tender to the bid and the bidder agrees to launch the bid on terms specified in the support agreement, subject to conditions such as a fiduciary out. The directors, officers or significant shareholders of a target may also enter into lock-up or voting agree - ments with the acquiror to deposit their shares to the bid or vote their shares in favour of an arrangement. These agreements may be “hard” or “soft” (see 6.11 Irrevocable Commitments ). Stock exchange rules may require that disinterested security holders approve of voting agreements requir - ing shareholders to vote their shares in accordance with management recommendations. Negative voting agreements (those requiring a shareholder not to vote against management’s recommendations), however, are not required to be approved by disinterested secu - rity holders.
• There is no shareholder rights plan in effect, or the rights plan will be waived; • Regulatory approvals (including under the Compe - tition Act and the ICA) and third-party approvals or consents have been obtained; • There has not been a material adverse change; • There is no existing, pending or threatened litiga - tion involving the target that would lead to a mate - rial adverse effect; or • There are no laws that would prevent the bidder from taking up or paying for the securities subject to the bid and there are no laws in effect or pro - posed that would have an adverse effect on the target. In takeover bids, the offeror must make adequate arrangements before the bid to ensure that the required funds are available to make full payment, as discussed in 6.6 Requirement to Obtain Financing . 6.5 Minimum Acceptance Conditions All bids, even partial bids, must provide for a manda - tory minimum tender condition that more than 50% of securities owned by security holders other than the bidder be tendered to the bid. This minimum ten - der requirement must be met before the bidder may acquire any of the securities subject to the bid. Bids for all of the outstanding shares may include a higher minimum tender condition to ensure that the bidder, through a second-step business combination, can obtain the remaining shares that are not depos - ited. This condition will usually require a deposit of at least 66⅔% of the outstanding shares and sufficient shares to obtain approval of a majority of the minority shareholders for the second-step transaction. Cana - dian securities regulations allow securities that were obtained under a lock-up to be voted as part of the majority of the minority vote if the locked-up secu - rity holder is treated identically to all others under the offer. If a bidder is only seeking control, it may include a minimum tender requirement of, for example, 51% of the outstanding shares instead. Parties may apply to Canadian securities regulators to waive or vary the minimum tender condition, although regulators will allow such a waiver only in rare cases.
274 CHAMBERS.COM
Powered by FlippingBook