Securities Law & Instruments


Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1 – BAR – An issuer requires relief from the requirement to file a business acquisition report – The acquisition is insignificant applying the asset and investment tests; applying the profit or loss test produces an anomalous results because the significance of the acquisition under this test is disproportionate to its significance on an objective basis in comparison to the results of the other significance tests and all other business, commercial, financial and practical factors; the filer has provided additional measures that demonstrate the insignificance of the property to the filer and that are generally consistent with the results when applying the asset and investment tests.

Applicable Legislative Provisions

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
National Instrument 51-102 Continuous Disclosure Obliga-tions, s. 13.1.

Citation: Re Enerflex Ltd., 2017 ABASC 134

August 8, 2017

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
ENERFLEX LTD.
(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) to grant an exemption from the obligation to file a business acquisition report (BAR) in connection with the Acquisition (as defined herein) as required by Part 8 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a)           the Alberta Securities Commission is the principal regulator for this application;

(b)           the Filer has provided notice that sub-section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in the provinces of British Columbia, Saskatch-ewan, Manitoba, Québec, New Bruns-wick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador and the Territories of Nunavut, Yukon and the Northwest Territories; and

(c)           this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 or NI 51-102 have the same meaning if used in this decision, unless otherwise defined herein.

Representations

This decision is based on the following facts represented by the Filer:

The Filer

1.             The Filer is a corporation formed under the Canada Business Corporations Act.

2.             The Filer’s head office is located in Calgary, Alberta.

3.             The Filer is a reporting issuer in each of the provinces and territories of Canada and is not in default of the securities legislation of any jurisdiction of Canada.

4.             The Filer’s common shares are listed and posted for trading on the Toronto Stock Exchange under the symbol "EFX".

The Acquisition

5.             On July 31, 2017, the Filer acquired substantially all of the business and assets (the Business) of a private company (PrivateCo) for total cash consideration of approximately US$115.5 million (the Acquisition).

Significance Test for the BAR

6.             Pursuant to subsection 8.2(1) of NI 51-102, if a reporting issuer completes a significant acqui-sition, it must file a BAR within 75 days after the acquisition date. The tests for determining whether an acquisition is a significant acquisition are the asset test as described in paragraph 8.3(2)(a) of NI 51-102 (the Asset Test), the investment test as described in paragraph 8.3(2)(b) of NI 51-102 (the Investment Test) and the profit or loss test as described in paragraph 8.3(2)(c) of NI 51-102 (the Profit or Loss Test). An acquisition by the Filer is a significant acquisition if any of the three foregoing tests yield a result that exceeds 20%.

7.             The Acquisition is not a significant acquisition under the Asset Test, as the Filer determined that PrivateCo's total assets set out in the PrivateCo audited financial statements as at December 31, 2016, subject to adjustments as described in subsection 8.3(13) of NI 51-102, equalled approximately 6% of the consolidated assets of the Filer as of December 31, 2016.

8.             The Acquisition is not a significant acquisition under the Investment Test, as the Filer determined that the consolidated investments in and advances to PrivateCo as at the acquisition date equalled approximately 8% of the consolidated assets of the Filer as at December 31, 2016.

9.             The Acquisition is however, a significant acquisition under the Profit or Loss Test, as the Filer determined that the consolidated specified profit or loss set out in the PrivateCo audited financial statements for the year ended December 31, 2016, subject to adjustments as described in subsection 8.3(13) of NI 51-102, equalled approximately 25% of the Filer's consolidated specified profit or loss for the year ended December 31, 2016.

10.          The application of the Profit or Loss Test produces an anomalous result for the filer because it exaggerates the significance of the Acquisition out of proportion to its significance on an objective basis in comparison to the results of the Asset Test and the Investment Test.

Non-significant Acquisition

11.          Overall, the Filer is of the view that the Acquisition is not a significant transaction to it from a practical, commercial, business or financial perspective, due to the results of the Asset Test and the Investment Test and other metrics provided by the Filer.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted.

“Cheryl McGillivray”
Manager, Corporate Finance
Alberta Securities Commission