OSC Rule 56-501 Restricted Shares -- Reporting issuer request for exemption from certain minority approval requirements of Part 3 of Rule 56-501 for subordinate voting shares -- issuer formed through statutory arrangement -- full disclosure provided in management proxy circular
OSC Rule 56-501 Restricted Shares.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
IN THE MATTER OF
(Section 4.2 of Rule 56-501)
WHEREAS GLV Inc. (the Corporation) has applied to the Director (the Director) for an exemption from the requirements of Part 3 of Commission Rule 56-501 (Rule 56-501) in connection with stock distributions under a prospectus exemption of Class A subordinated voting shares of the Corporation (Subordinate Voting Shares) in the Province of Ontario;
AND WHEREAS the Company has represented to the Director that:
1. The Corporation was incorporated on May 15, 2007 under the Canada Business Corporations Act (the CBCA) for the purpose of acquiring indirectly two divisions of Groupe Laperrière & Verreault Inc. (Groupe) by way of a court approved plan of arrangement (the Arrangement) finalized on August 18, 2007 between Groupe, its shareholders, FLSmidth & Co A/S (FLS) and 4417861 Canada Inc.
2. The Corporation's head office is located in Montréal, Québec.
3. The Corporation is a reporting issuer in all provinces and territories of Canada.
4. The authorized share capital of the Corporation consists of an unlimited number of Subordinate Voting Shares, Class B Multiple Voting Shares carrying 10 votes per share, participating and convertible into Subordinate Voting Shares, and preferred shares issuable in series, of which as of November 27, 2009, 36,987,694 Subordinate Voting Shares, 2,204,205 Class B Multiple Voting Shares and no preferred voting shares, were issued and outstanding.
5. The Subordinate Voting Shares and the Class B Multiple Voting Shares are listed on the Toronto Stock Exchange under the symbol GLV. A and GLV. B, respectively.
6. The Corporation is a leading global provider of technological and engineering solutions used in water treatment and pulp and paper production and has two main divisions.
7. The Corporation's Water Treatment Group specializes in the design and international marketing of solutions for the treatment and the recycling of municipal and industrial wastewater, as well as water used in various industrial processes. It also offers water intake screening solutions for power stations and desalination plants. With its extensive technological portfolio, the Water Treatment Group is positioned to provide comprehensive solutions for the filtration, clarification, treatment and purification of water that will either be returned to the environment, or be re-used in various industrial processes or for domestic purposes.
8. The Corporation's Pulp and Paper Group specializes in the design and global marketing of equipment and systems used in various stages of pulp and paper production, notably chemical pulping, pulp preparation, and sheet formation and finishing. The Pulp and Paper Group ranks amongst the foremost players in its industry and is a recognized leader in rebuilding, upgrading and optimization services for existing equipment, as well as the sale of spare parts.
9. The Corporation has previously filed an exemption application pursuant to National Policy 11-202 from section 12.3 of National Instrument 41-101 in connection with the filing of a preliminary short form prospectus in all provinces and territories of Canada on June 16, 2009. Receipt for the final short form prospectus was granted on June 22, 2009 and evidenced the granting of the requested exemption.
10. On August 18, 2007, Groupe finalized an Arrangement between itself, its shareholders, FLSmidth & Co A/S and 4417861 Canada Inc. Immediately prior to the Arrangement, Groupe transferred its water treatment group, it's pulp and paper group and its manufacturing unit to a new corporation, the Corporation, which was subsequently spun off to Groupe's public shareholders. Immediately after the transfer of the water treatment, pulp and paper and manufacturing businesses to the Corporation, FLS acquired all the outstanding Subordinate Voting Shares and Class B Multiple Voting Shares of Groupe, thereby becoming the sole shareholder of Groupe.
11. In connection with the Arrangement, Groupe prepared and sent to its shareholders and filed with the appropriate securities regulatory authorities, a management proxy circular (the Circular) in connection with the solicitation by management of proxies in respect of the Arrangement. The Circular contained prospectus level disclosure with respect to the Corporation and the Arrangement transaction. Groupe retained the services of CIBC World Markets Inc. to provide the special committee of the Board of Directors of Groupe with an opinion that the consideration to be received by Groupe's security holders under the Arrangement was fair from a financial point of view to them and the fairness opinion was summarized and disclosed in its entirety in the Circular. Rights of dissent were made available to Groupe's security holders pursuant to the Arrangement. The Superior Court of Québec considered the fairness of the Arrangement in granting its final order approving the Arrangement. Articles of Arrangement were subsequently filed. The Arrangement became effective on August 18, 2007.
12. In connection with the Arrangement, Groupe called a special meeting of its shareholders to consider and approve the Arrangement. The meeting of the shareholders was held on July 27, 2007. The Arrangement was required to receive 75% approval of all classes of Groupe's security holders. The Arrangement was approved by a majority of 99.92% for the holders of Subordinate Voting Shares and unanimously for the holders of the Class B Multiple Voting Shares. Groupe's security holders all became security holders of the Corporation as a result of the Arrangement.
13. In the Circular, rights of dissent were made available to Groupe's security holders pursuant to the Arrangement. We are advised that none of Groupe's security holders dissented in respect of the Arrangement transaction. Furthermore, in connection with the Arrangement, no minority shareholders needed the protection provided by Rule 56-501 since the share capital of the Corporation mirrored the share capital of Groupe.
14. In the context of the Arrangement, the rights and privileges attaching to all classes of shares of the Corporation were approved by the Toronto Stock Exchange (the Exchange) as part of the listing process. Any further distribution of Subordinate Voting Shares by the Corporation would also be subject to the Exchange approval who is also exercising regulatory oversight.
15. We further submit that should the Corporation be involved in any take-over bid or special transactions it will always have to respect the requirements of Multilateral Instrument 61-101 on the Protection of Minority Security Holders in Special Transactions.
16. The Corporation does not technically satisfy the requirements of subsection 3.2 of OSC Rule 56 501 since at the special Shareholders' meeting held on July 27, 2007, the special resolution to approve the Arrangement was obtained from the holders of the Class A Subordinate Voting Shares and the holders of Class B Multiple Voting Shares of Groupe, the predecessor company of the Corporation, and not from the holders of Subordinate Voting Shares and the holders of Class B Multiple Voting Shares of the Corporation and minority approval was not obtained because securities held by a control person were not excluded.
17. Even if the Corporation had followed all the requirements of paragraph (e) of subsection 3.2 of Rule 56-501, and had excluded Mr. Laurent Verreault, the CEO of the Corporation, who held personally 7,200 Class B Multiple Voting Shares and a further 1,673,040 Class B Multiple Voting Shares through 3033548 Nova Scotia Company, a corporation of which all the shares are held by Trust Laurent Verreault, in view of the overwhelming support expressed in favour of the Arrangement, the exclusion of Mr. Verreault would not have had any effect on the outcome of the vote.
18. The policy rationale for the requirement under Part 3 of Rule 56-501 is to restrict the issuance of restricted shares, such as the Subordinate Voting Shares of the Corporation, unless such stock distribution or the reorganization carried out by the issuer related to the restricted shares that are the subject of the stock distribution has obtained minority approval and that the disclosure in the information circular contained prescribed information.
19. The Corporation has met that policy rationale through the mailing, by Groupe, of an information circular to each shareholder of Groupe (each of which automatically became a shareholder of the Corporation pursuant to the Arrangement), and the holders of Subordinate Voting Shares and the holders of the Class B Multiple Voting Shares of Groupe, each voting as a Class, adopted the special resolution to approve the Arrangement.
20. The content of the information circular had also been previously approved by a Superior Court judge in the context of the Arrangement.
AND WHEREAS the Director is satisfied that it would not be prejudicial to the public interest to grant the exemption requested;
IT IS ORDERED pursuant to section 4.2 of Rule 56-501 that the Corporation be and it is hereby exempted from the requirements of Part 3 of Rule 56-501 in connection with any stock distribution of Subordinate Voting Shares under a prospectus exemption and which complies with the requirements of National Instrument 45-106 Prospectus and Registration Exemptions so long as any subsequent reorganization, if any, carried out by the Corporation related to the Subordinate Voting Shares receives minority approval (as defined in Rule 56-501) and otherwise complies with the provisions of Part 3 of Rule 56-501.
Dated December 4, 2009