Securities Law & Instruments

Headnote

Cash "Dutch Auction" issuer bid madein Ontario in two stages - First stage of issuer bid is technicallytake-over bid by investment advisor of issuer - Second stagecould be construed as indirect issuer bid in Ontario - Issuerbid made in accordance with the laws of the United Kingdom,the rules and regulations of the London Stock Exchange and theListing Rules of the UK Listing Authority - Issuer bid exemptedfrom the issuer bid and take-over bid requirements of Part XX,subject to certain conditions.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as amended,ss. 93(1)(e), 93(3)(h), 95 to 100 and 104(2)(c).

Recognition Orders Cited

In the Matter of the Recognition of CertainJurisdictions (Clauses 93(1)(e) and 93(3((h) of Act) (1997)20 OSCB 1035.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5,AS AMENDED (the "Act")

AND

IN THE MATTER OF

ARC INTERNATIONAL PLC ANDWESTLB PANMURE LIMITED

 

ORDER

(Clause 104(2)(c))

UPON the application (the "Application")of ARC International plc ("ARC") and WestLBPanmure ("WestLB") to the Ontario SecuritiesCommission (the "Commission") for an orderpursuant to clause 104(2)(c) of the Act exempting ARC and WestLBfrom the requirements of sections 95 through 100 of the Act(the "Issuer Bid and Take-over Bid Requirements")in connection with a proposed return of capital by ARC to theholders of ARC ordinary shares (the "ARC Shares")through a tender offer (the "Offer"), wherebyWestLB will purchase through the facilities of London StockExchange plc (the "LSE"), as principal, issuedand outstanding ARC Shares and, immediately thereafter, ARCwill purchase through the facilities of the LSE from WestLB,for cancellation, the ARC Shares so purchased by WestLB;

AND UPON considering the Applicationof ARC and WestLB and the recommendation of the staff of theCommission;

AND UPON ARC and WestLB having representedto the Commission that:

1. ARC is a company incorporated under thelaws of England and Wales and the ARC Shares are listed onthe Official List of the UK Listing Authority and traded onthe LSE's market for listed securities.

2. ARC is not a reporting issuer under thesecurities legislation of any province or territory of Canadaand none of the ARC Shares are listed for trading on any Canadianstock exchange.

3. As at March 10, 2003, ARC had 300,473,184ARC Shares issued and outstanding.

4. WestLB is regulated in the United Kingdomby The Financial Services Authority Limited and is actingexclusively for ARC in connection with the Offer. WestLB isnot a registrant under the securities legislation of any provinceor territory of Canada.

5. The Board of Directors of ARC publiclyannounced on November 22, 2002 that it believed ARC had morethan sufficient working capital funding to bring the ARC Groupof Companies to profitability on the basis of reasonably prudentassumptions and that it was proposed to return £50 millionof capital to holders of ARC Shares ("Shareholders")during the first half of 2003 in order to optimise ARC's capitalstructure and hence Shareholders' potential for future returns.The Board publicly announced on December 6, 2002 that it believedthat the Offer would be the most effective way of returningcapital to Shareholders.

6. The Offer is an all-cash offer and willbe implemented in two stages (although the LSE proceduresand relevant stamp duty regime allow it to be treated as ifit were a unified market transaction). Under the terms ofthe Offer, WestLB will purchase at the Strike Price (as definedin paragraph 8(c) below), as principal, issued and outstandingARC Shares for up to a total consideration of £48.5million (less the costs of the Offer). Immediately followingthe purchase of ARC Shares by WestLB, it will sell throughthe facilities of the LSE the ARC Shares purchased by it toARC, also at the Strike Price. ARC will then cancel such ARCShares. ARC also intends to make a loan of £1.5 millionto the trustees of its employee benefit trust ("EBTTrustees") to enable the EBT Trustees to buy ARCShares through the facilities of the LSE for use in coveringoption grants ("EBT Market Purchases"). TheOffer and the EBT Market Purchases together constitute thereturn of £50 million of capital to Shareholders.

7. On March 7, 2003, resolutions were passedat ARC's Extraordinary General Meeting authorizing, interalia, the reduction of ARC's share premium account (subjectto confirmation by the Courts of England and Wales) so asto create sufficient distributable profits within ARC (asrequired by English company law) to enable the making of theOffer.

8. The Offer will be made according to a modifiedDutch auction procedure as follows:

(a) ARC Shares may be tendered in a pricerange which will be set with reference to the average middlemarket price of an ARC Share for the ten business days endingon the business day prior to the mailing of the circularin connection with the Offer, such mailing expected to takeplace in on or about May 8, 2003 (the "Price Range").ARC Shares may only be tendered within the Price Range butShareholders may tender their ARC Shares at different priceswithin the Price Range.

(b) In the alternative, Shareholders mayelect to tender their ARC Shares at the Strike Price (asdefined below).

(c) The strike price (the "StrikePrice") payable for ARC Shares, which will be determinedat the conclusion of the Offer on the basis of the pricesat which ARC Shares have been tendered, will be the lowestprice per ARC Share (within the Price Range) which willallow WestLB to purchase the maximum number of ARC Sharesfor an aggregate purchase price not exceeding £48.5million (less the costs of the Offer) in accordance withthe order of priority fixed for the Offer.

(d) All ARC Shares validly acquired by WestLBunder the Offer, whether tendered at a specified price equalto or below the Strike Price or elected to be tendered atthe Strike Price, will be purchased at the Strike Price.

(e) If the aggregate consideration to bepaid for all ARC Shares tendered is £48.5 million(less the costs of the Offer) or less, all ARC Shares validlytendered will be purchased. If the aggregate price underthe Offer for all ARC Shares tendered at or below the StrikePrice exceeds £48.5 million (less the costs of theOffer), all tenders at or below the Strike Price will bescaled down in the order of priority fixed for the Offersuch that the total price of ARC Shares purchased pursuantto the Offer does not exceed £48.5 million (less thecosts of the Offer).

(f) Tenders above the Strike Price willbe rejected.

9. The Offer is being made in compliance withthe laws of the United Kingdom, the rules and regulationsof the LSE and the Listing Rules of the UK Listing Authority,and not pursuant to any exemption from such requirements.

10. While ARC, as a UK public company, isat all times subject to the City Code on Take-overs and Mergers(the "City Code"), the City Code does notapply specifically to the conduct of the Offer.

11. As at March 10, 2003, there were onlytwenty-two (22) Shareholders whose last address, as shownon the books of ARC, is in Ontario (collectively, the "OntarioARC Shareholders"), holding, in the aggregate, 59,550ARC Shares, representing less than 0.02% of the issued andoutstanding ARC Shares.

12. The Offer is being made on the same termsand conditions to the Ontario ARC Shareholders as it is beingmade to Shareholders resident in the United Kingdom.

13. Insofar as the Offer is made to the OntarioARC Shareholders, the Offer may be a take-over bid withinthe meaning of subsection 89(1) of the Act.

14. Insofar as the Offer is made to the OntarioARC Shareholders, the Offer may also be construed as an indirectissuer bid within the meaning of subsection 89(1) of the Actand section 92 of the Act.

15. Although the Commission has recognizedthe United Kingdom for the purposes of clauses 93(1)(e) and93(3)(h) of the Act where the take-over bid or issuer bidcomplies with the requirements of the rules of the City Codeand is not exempt therefrom, ARC and WestLB cannot rely uponthe exemption in clause 93(1)(e) and 93(3)(h) from the IssuerBid and Take-over Bid Requirements because the City Code doesnot apply specifically to the Offer.

16. All materials relating to the Offer whichare provided to Shareholders resident in the United Kingdomwill be concurrently sent to the Ontario ARC Shareholdersand filed with the Commission.

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to clause 104(2)(c)of the Act that in connection with the Offer, ARC and WestLBare exempted from the Issuer Bid and Take-over Bid Requirements,provided that:

(a) the Offer and any amendments theretoare made in compliance with the laws of the United Kingdom,the rules and regulations of the LSE and the Listing Rulesof the UK Listing Authority, and not pursuant to an exemptionfrom such requirements; and

(b) all materials relating to the Offerand any amendments thereto that are sent by or on behalfof ARC and WestLB to Shareholders resident in the UnitedKingdom are also concurrently sent to the Ontario ARC Shareholdersand copies of such materials filed with the Commission.

April 15, 2003.

"Paul M. Moore"
"Theresa McLeod"