Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Takeover Bids -- Pre-Bid Integration -- Offeror requires relief from subsection 2.4(1) of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids and subsection 93.2(1) of the Securities Act (Ontario), which require that an offeror making a take-over bid must offer consideration for the securities deposited under the bid that is at least equal to and in the same form as the highest consideration paid by the offeror in any purchase not generally available to holders of such securities and made within the period of 90 days immediately preceding such bid -- payment of common shares of the offeror in lieu of cash permitted because (i) common shares of offeror are highly liquid; and (ii) market price of common shares of offeror is at a substantial premium to the cash price paid under prior transaction.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 93.2(1), 104(2)(c).
Citation: Toromont Industries Ltd., Re, 2009 ABASC 562
November 12, 2009
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
TOROMONT INDUSTRIES LTD.
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) that the requirement under the Legislation that an offeror making a take-over bid must offer consideration for the securities deposited under the bid that is at least equal to and in the same form as the highest consideration paid by the offeror in any purchase not generally available to holders of such securities and made within the period of 90 days immediately preceding such bid (the Pre-Bid Integration Requirement) shall not apply to a take-over bid to be made by the Filer (the Offer) to purchase all of the issued and outstanding trust units (Trust Units) of Enerflex Systems Income Fund (Enerflex) and all of the issued and outstanding class B limited partnership units (Exchangeable LP Units and, together with the Trust Units, the Units) of Enerflex Holdings Limited Partnership (Enerflex LP) (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 subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, the Northwest Territories, Nunavut and Yukon; and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
The decision is based on the following facts represented by the Filer:
1. The Filer is a corporation existing under the Canada Business Corporations Act and its registered and head office is located in Concord, Ontario.
2. The Filer is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia and Prince Edward Island and is not in default of any of the requirements of securities legislation applicable to it.
3. The authorized share capital of the Filer consists of an unlimited number of common shares (the Filer Shares) and an unlimited number of preferred shares. As at October 26, 2009, there were 64,731,937 Filer Shares issued and outstanding and no preferred shares were issued and outstanding.
4. The Filer Shares are listed and posted for trading on the Toronto Stock Exchange (the TSX).
5. Enerflex is an open-ended mutual fund trust governed by the laws of the Province of Alberta pursuant to a Deed of Trust dated August 22, 2006 and its head office is located in Calgary, Alberta.
6. Enerflex is a reporting issuer in each of the provinces and territories of Canada.
7. The authorized capital of Enerflex consists of an unlimited number of Trust Units and an unlimited number of special voting units. As at November 1, 2009, there were 44,281,622 Trust Units issued and outstanding and one special voting unit issued and outstanding.
8. The Trust Units are listed and posted for trading on the TSX.
9. Enerflex LP, an indirect subsidiary of Enerflex, is a limited partnership formed under the laws of the Province of Alberta pursuant to a limited partnership agreement dated August 23, 2006. Enerflex LP's head office is located in Calgary, Alberta.
10. Enerflex LP is a reporting issuer in British Columbia, Alberta, Saskatchewan, Québec and Nova Scotia.
11. The authorized capital of Enerflex LP consists of an unlimited number of class A limited partnership units, all of which are held indirectly by Enerflex, and an unlimited number of Exchangeable LP Units. The Exchangeable LP Units are exchangeable for Trust Units on a one-for-one basis. As at November 1, 2009, there were 2,663,422 Exchangeable LP Units outstanding.
12. During the period from August 14, 2009 to October 2, 2009, the Filer acquired an aggregate of 702,700 Trust Units (the Pre-Bid Purchases) for cash consideration. No additional Trust Units have been purchased by the Filer since October 2, 2009. The highest price paid by the Filer for a Trust Unit in the Pre-Bid Purchases was $10.05 (the Highest Pre-Bid Purchase Price).
13. On October 16, 2009, the Filer publicly announced that it had made a proposal to Enerflex to enter into a business combination transaction whereby the holders of Units would receive cash and Filer Shares representing total consideration of $13.50 per Unit, with at least 50% of the consideration comprised of cash and the balance in Filer Shares.
14. The Filer and Enerflex were not able to successfully negotiate a business combination transaction, and on November 12, 2009, the Filer announced its intention to proceed with the Offer.
15. As consideration for each Unit, the Filer will offer pursuant to the Offer, at the option of the holders of Units, either (i) $13.50 cash or (ii) $0.05 cash plus 0.5098 Filer Shares, subject in each case to pro ration. The maximum amount of cash payable by the Filer pursuant to the Offer will be 50% of the total consideration and the balance will be payable in Filer Shares.
16. There is a "liquid market", as that term is defined in section 1.2 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101), in the Filer Shares; the Filer has received an opinion from its financial advisor to that effect.
17. In any event, there will continue to be a "liquid market", as that term is defined in section 1.2 of MI 61-101, in the Filer Shares subsequent to the Filer taking up and paying for the Units pursuant to the terms of the Offer; the Filer has received an opinion from its financial advisor to that effect.
18. The $13.50 price offered under the Offer represents a 34% premium to the closing price of the Trust Units on the TSX on October 16, 2009 and a 34% premium to the Highest Pre-Bid Purchase Price.
19. The consideration to be received by holders of Trust Units pursuant to the Offer, including those holders who will receive all or a substantial portion of their consideration in Filer Shares, represents a significant premium to the Highest Pre-Bid Purchase Price, and the Filer has received an opinion from its financial advisor to that effect.
Each of the Decision Makers is satisfied that the decision meets the tests 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.