Securities Law & Instruments

Headnote

Subsection 104(2)(c) of the Act -- Issuer bid -- relief from issuer bid requirements in sections 94 to 94.8 and 97 to 98.7 of the Act -- Issuer proposes to purchase, at a discounted purchase price, up to 1,210,163 of its common shares from one of its shareholders -- due to the discounted purchase price, proposed purchases cannot be made through the TSX trading system -- but for the fact that the proposed purchases cannot be made through the TSX trading system, the Issuer could otherwise acquire the subject shares in reliance upon the issuer bid exemption available under section 101.2 of the Act and in accordance with the TSX rules governing normal course issuer bid purchases -- the selling shareholder did not purchase the subject shares in anticipation or contemplation of resale to the Issuer and has not, for a minimum of 30 days prior to the date of the application seeking the requested relief, purchased common shares of the Issuer in anticipation or contemplation of a sale of common shares to the Issuer -- no adverse economic impact on, or prejudice to, the Issuer or public shareholders -- proposed purchases exempt from the issuer bid requirements in sections 94 to 94.8 and 97 to 98.7 of the Act, subject to conditions, including that the Issuer not purchase, in the aggregate, more than one-third of the maximum number of shares to be purchased under its normal course issuer bid by way of off-exchange block purchases, and that the Issuer will not make any proposed purchase unless it has first obtained written confirmation that between the date of the order and the date on which the proposed purchase is completed, the selling shareholder has not purchased, had purchased on its behalf, or otherwise accumulated, any common shares of the Issuer.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 94 to 94.8, 97 to 98.7, 104(2)(c).

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED AND IN THE MATTER OF CANADIAN PACIFIC RAILWAY LIMITED

ORDER (Clause 104(2)(c))

UPON the application (the "Application") of Canadian Pacific Railway Limited (the "Issuer") to the Ontario Securities Commission (the "Commission") for an order under clause 104(2)(c) of the Securities Act (Ontario) (the "Act") exempting the Issuer from the requirements of sections 94 to 94.8, inclusive, and 97 to 98.7, inclusive, of the Act (the "Issuer Bid Requirements") in connection with the proposed purchases by the Issuer of up to 1,210,163 common shares in the capital of the Issuer (collectively, the "Subject Shares") in one or more trades from Canadian Imperial Bank of Commerce (the "Selling Shareholder");

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Issuer (and the Selling Shareholder in respect of paragraphs 5, 6, 7, 8, 9, 10, 16, 27 and 28 as they relate to the Selling Shareholder) having represented to the Commission that:

1. The Issuer is a corporation incorporated under the Canada Business Corporations Act.

2. The registered, executive and head office of the Issuer is located at 7550 Ogden Dale Road S.E., Calgary, Alberta, T2C 4X9.

3. The Issuer is a reporting issuer in each of the provinces and territories of Canada and the common shares of the Issuer (the "Common Shares") are listed for trading on the Toronto Stock Exchange (the "TSX") and the New York Stock Exchange (the "NYSE") under the symbol "CP". The Issuer is not in default of any requirement of the securities legislation in the jurisdictions in which it is a reporting issuer.

4. The Issuer's authorized share capital consists of an unlimited number of Common Shares, an unlimited number of First Preferred Shares and an unlimited number of Second Preferred Shares, of which 170,089,858 Common Shares and no First Preferred Shares or Second Preferred Shares were issued and outstanding as of October 31, 2014.

5. The Selling Shareholder has its corporate headquarters in Toronto, Ontario.

6. The Selling Shareholder does not, directly or indirectly, own more than 5% of the issued and outstanding Common Shares, is at arm's length to the Issuer and is not an "insider" of the Issuer, an "associate" of an "insider" of the Issuer, or an "associate" or "affiliate" of the Issuer, as such terms are defined in the Act.

7. The Selling Shareholder is an "accredited investor" within the meaning of National Instrument 45-106 Prospectus and Registration Exemptions.

8. The Selling Shareholder is the beneficial owner of at least 1,210,163 Common Shares. None of the Subject Shares were acquired by, or on behalf of, the Selling Shareholder in anticipation or contemplation of resale to the Issuer.

9. No Common Shares were purchased by, or on behalf of, the Selling Shareholder on or after October 7, 2014, being the date that was 30 days prior to the date of the Application, in anticipation or contemplation of a sale of Common Shares to the Issuer.

10. The Subject Shares are held by the Selling Shareholder in connection with arrangements to hedge client transactions in respect of the Common Shares. The Selling Shareholder will not purchase, have purchased on its behalf, or otherwise accumulate, any Common Shares to re-establish its holdings of Common Shares which will have been reduced as a result of the sale of the Subject Shares pursuant to the Proposed Purchases (as defined below) between the date of this Order and the date on which a Proposed Purchase is to be completed.

11. On March 11, 2014, the Issuer announced a normal course issuer bid (the "Normal Course Issuer Bid") to purchase up to 5,270,374 Common Shares during the period from March 17, 2014 to March 16, 2015 pursuant to the terms of a "Notice of Intention to Make a Normal Course Issuer Bid" (the "Original Notice") submitted to, and accepted by, the TSX.

12. On September 29, 2014, the Issuer announced that the TSX accepted an amendment to the Original Notice (the "Amendment" and together with the Original Notice, the "Notice") effective October 2, 2014 to increase the maximum number of Common Shares that may be purchased for cancellation under the Normal Course Issuer Bid from 5,270,374 Common Shares, being approximately 3.00% of the Common Shares issued and outstanding, to 12,650,862 Common Shares, representing approximately 8.00% of the Issuer's "public float", each as at March 4, 2014 (being the reference date specified in the Original Notice).

13. In accordance with the Notice, purchases under the Normal Course Issuer Bid may be conducted through the facilities of the TSX, the NYSE or alternative trading systems, if eligible, or by such other means as may be permitted by the TSX and/or the NYSE in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the "TSX Rules"), including private agreements under issuer bid exemption orders issued by securities regulatory authorities (each, an "Off-Exchange Block Purchase").

14. The Commission granted the Issuer two orders, one on March 28, 2014 (the "March 2014 Order") and the other on June 10, 2014 (the "June 2014 Order") pursuant to clause 104(2)(c) of the Act exempting the Issuer from the Issuer Bid Requirements in connection with Off-Exchange Block Purchases by the Issuer of up to 1,300,000 Common Shares and 456,791 Common Shares, respectively, in one or more trades from arm's length selling shareholders. As at October 31, 2014, the Issuer has acquired an aggregate of 6,390,374 Common Shares pursuant to the Normal Course Issuer Bid, including 1,300,000 Common Shares under the March 2014 Order and 456,791 Common Shares under the June 2014 Order.

15. The Issuer implemented an automatic repurchase plan (the "ARP") on October 1, 2014 to permit the Issuer to make purchases under its Normal Course Issuer Bid at such times when the Issuer would not be permitted to trade in its Common Shares during regularly scheduled quarterly blackout periods. The ARP was approved by the TSX, and complies with the TSX Rules, applicable securities laws and this Order, and contains provisions restricting the Issuer from conducting a Block Purchase (as defined below) in accordance with the TSX Rules during the calendar week in which the Issuer completes a Proposed Purchase. Under the terms of the ARP, at times when the Issuer is not subject to blackout restrictions, the Issuer may, but is not required to, instruct the designated broker to make purchases under the Normal Course Issuer Bid in accordance with the terms of the ARP. Such purchases under the ARP will be determined by the designated broker in its sole discretion based on parameters established by the Issuer prior to any blackout period in accordance with the TSX Rules, applicable securities laws and the terms of the agreement between the designated broker and the Issuer. No Subject Shares will be acquired under the ARP or otherwise during any of the Issuer's blackout periods.

16. The Issuer intends to enter into one or more agreements of purchase and sale with the Selling Shareholder (each an "Agreement"), pursuant to which the Issuer will agree to purchase Subject Shares from the Selling Shareholder by way of one or more purchases, each occurring by March 16, 2015 (each such purchase, a "Proposed Purchase") for a purchase price that will be negotiated at arm's length between the Issuer and the Selling Shareholder (each such price, a "Purchase Price" in respect of such Proposed Purchase). The Purchase Price will, in each case, be at a discount to the prevailing market price and below the prevailing bid-ask price for the Common Shares on the TSX at the time of each Proposed Purchase.

17. The Subject Shares acquired under each Proposed Purchase will constitute a "block" as that term is defined in section 628 of the TSX Rules.

18. The purchase of any of the Subject Shares by the Issuer pursuant to an Agreement will constitute an "issuer bid" for the purposes of the Act, to which the applicable Issuer Bid Requirements would apply.

19. Because the Purchase Price will, in each case, be at a discount to the prevailing market price and below the bid-ask price for the Common Shares on the TSX at the time of the relevant Proposed Purchase, none of the Proposed Purchases can be made through the TSX trading system and, therefore, will not occur "through the facilities" of the TSX. As a result, the Issuer will be unable to acquire Subject Shares from the Selling Shareholder in reliance upon the exemption from the Issuer Bid Requirements that is available pursuant to subsection 101.2(1) of the Act.

20. But for the fact that the Purchase Price will be at a discount to the prevailing market price and below the bid-ask price for the Common Shares on the TSX at the time of each such Proposed Purchase, the Issuer could otherwise acquire the applicable Subject Shares on the TSX as a "block purchase" (a "Block Purchase") in accordance with the block purchase exception in clause 629(l)7 of the TSX Rules and the exemption from the Issuer Bid Requirements that is available pursuant to subsection 101.2(1) of the Act.

21. The sale of any of the Subject Shares to the Issuer will not be a "distribution" (as defined in the Act).

22. For each Proposed Purchase, the Issuer will be able to acquire the applicable Subject Shares from the Selling Shareholder without the Issuer being subject to the dealer registration requirements of the Act.

23. Management of the Issuer is of the view that through the Proposed Purchase(s), the Issuer will be able to purchase the Subject Shares at a lower price than the price at which it would otherwise be able to purchase Common Shares under the Normal Course Issuer Bid through the facilities of the TSX and management of the Issuer is of the view that this is an appropriate use of the Issuer's funds.

24. The purchase of the Subject Shares will not adversely affect the Issuer or the rights of any of the Issuer's security holders and it will not materially affect the control of the Issuer. To the knowledge of the Issuer, the Proposed Purchases will not prejudice the ability of other security holders of the Issuer to otherwise sell Common Shares in the open market at the then-prevailing market price. The Proposed Purchases will be carried out at minimal cost to the Issuer.

25. To the best of the Issuer's knowledge, as of October 31, 2014, the "public float" for the Common Shares represented approximately 92% of all issued and outstanding Common Shares for purposes of the TSX Rules.

26. The Common Shares are "highly-liquid securities" within the meaning of section 1.1 of OSC Rule 48-501 Trading during Distributions, Formal Bids and Share Exchange Transactions and section 1.1 of the Universal Market Integrity Rules.

27. Other than the Purchase Price, no fee or other consideration will be paid in connection with the Proposed Purchases.

28. At the time that each Agreement is entered into by the Issuer and the Selling Shareholder and at the time of each Proposed Purchase, neither the Issuer, nor any member of the Selling Shareholder's trading groups, nor any personnel of the Selling Shareholder that negotiated the Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Agreement and sell the Subject Shares, will be aware of any "material change" or "material fact" (each as defined in the Act) in respect of the Issuer that has not been generally disclosed.

29. The Issuer will not purchase, pursuant to Off-Exchange Block Purchases, in aggregate, more than one-third of the maximum number of Common Shares that the Issuer can purchase under its Normal Course Issuer Bid, such one-third being equal to 4,216,954 Common Shares as of the date of this Order.

30. The Issuer has made an application to the Commission for exemptive relief from the Issuer Bid Requirements in connection with the proposed acquisition by the Issuer of up to 1,250,000 Common Shares from another holder of Common Shares pursuant to Off-Exchange Block Purchases (the "Concurrent Application").

31. Assuming completion of the purchase of the maximum number of Subject Shares, being 1,210,163 Subject Shares, and the maximum number of Common Shares which are the subject of the Concurrent Application, being 1,250,000 Common Shares, the Issuer will have purchased under the Normal Course Issuer Bid an aggregate of 4,216,954 Common Shares pursuant to Off-Exchange Block Purchases, representing one-third of the maximum of 12,650,862 Common Shares authorized to be purchased under the Normal Course Issuer Bid.

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

IT IS ORDERED pursuant to clause 104(2)(c) of the Act that the Issuer be exempt from the Issuer Bid Requirements in connection with the Proposed Purchases, provided that:

(a) the Proposed Purchases will be taken into account by the Issuer when calculating the maximum annual aggregate limit that is imposed upon the Issuer's Normal Course Issuer Bid in accordance with the TSX Rules;

(b) the Issuer will refrain from conducting either a Block Purchase in accordance with the TSX Rules, or another Off-Exchange Block Purchase, during the calendar week in which it completes a Proposed Purchase and will not make any further purchases under its Normal Course Issuer Bid for the remainder of the calendar day on which it completes a Proposed Purchase;

(c) the Purchase Price in respect of each Proposed Purchase will be at a discount to the last "independent trade" (as that term is used in paragraph 629(l)1 of the TSX Rules) of a board lot of Common Shares immediately prior to the execution of such Proposed Purchase;

(d) the Issuer will otherwise acquire any additional Common Shares pursuant to its Normal Course Issuer Bid in accordance with the Notice and the TSX Rules, including by means of open market transactions and by such other means as may be permitted by the TSX, including under automatic trading plans and, subject to condition (i) below, by Off-Exchange Block Purchases;

(e) immediately following each Proposed Purchase of Subject Shares from the Selling Shareholder, the Issuer will report the purchase of Subject Shares to the TSX;

(f) at the time that each Agreement is entered into by the Issuer and the Selling Shareholder and at the time of each Proposed Purchase, neither the Issuer, nor any member of the Selling Shareholder's trading groups, nor any personnel of the Selling Shareholder that have negotiated the Agreement or have made, or participated in the making of, or provided advice in connection with, the decision to enter into the Agreement and sell the Subject Shares, will be aware of any "material change" or "material fact" (each as defined in the Act) in respect of the Issuer that has not been generally disclosed;

(g) in advance of the first Proposed Purchase, the Issuer will issue a press release disclosing (i) its intention to make the Proposed Purchases, and (ii) that information regarding each Proposed Purchase, including the number of Common Shares purchased and the aggregate purchase price, will be available on the System for Electronic Document Analysis and Retrieval (SEDAR) following the completion of each such purchase;

(h) the Issuer will report information regarding each Proposed Purchase, including the number of Subject Shares purchased and the aggregate Purchase Price, on SEDAR before 5:00 p.m. (Toronto time) on the business day following such purchase;

(i) the Issuer does not purchase, pursuant to Off-Exchange Block Purchases, in the aggregate more than one-third of the maximum number of Common Shares the Issuer can purchase under its Normal Course Issuer Bid, such one-third being equal to, as of the date of this Order, 4,216,954 Common Shares; and

(j) the Issuer will not make any Proposed Purchase unless it has first obtained confirmation in writing that between the date of this Order and the date on which such Proposed Purchase is to be completed, the Selling Shareholder has not purchased, had purchased on its behalf, or otherwise accumulated, any Common Shares.

DATED at Toronto, Ontario this 25th day of November, 2014.

"Edward P. Kerwin"
Commissioner
Ontario Securities Commission
 
"Christopher Portner"
Commissioner
Ontario Securities Commission