Cascades inc

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- BAR -- Exemption from the requirement to file a BAR under Part 8 of National Instrument 51-102 Continuous Disclosure Obligations -- The acquisition is non-significant applying the asset and investment tests; applying the profit or loss test produces an anomalous result 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 and financial factors; the Filer has provided additional measures that demonstrate the non-significance of the Acquisition to the Filer and that are generally consistent with the results when applying the asset and investment tests.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 8.2(1) and Part 13.

TRANSLATION

November 18, 2019

IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OFCASCADES INC. (the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) to grant an exemption pursuant to Part 13Regulation 51-102 respecting Continuous Disclosure Obligations (Regulation 51-102) from the requirement in Part 8 of Regulation 51-102 to file a business acquisition report (BAR) in connection with the Filer's acquisition of substantially all of the assets of Orchids Paper Products Company (Orchids) on September 13, 2019 (the Exemption Sought).

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

the Autorité des marchés financiers is the principal regulator for the Application;

the Filer has provided notice that Subsection 4.7(1) of Regulation 11-102 respecting Passport System (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador; and

the 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 Regulation 14-101 respecting Definitions, Regulation 11-102 and Regulation 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:

1. The Filer's head office is located at 404 Marie-Victorin, C.P. 30, Kingsey Falls (Québec) J0A 1B0.

2. The Filer's common shares are listed on the Toronto Stock Exchange (TSX), under the ticker symbol "CAS".

3. The Filer is a reporting issuer in Québec, British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador and is not in default of securities legislation in any of the provinces of Canada.

4. On September 13, 2019, the Filer acquired substantially all of the assets of Orchids. The Filer paid a total cash consideration of US$207 million, plus the assumption of other liabilities upon the closing, which in accordance with IFRS, results in a total consideration paid of US$237 million, all of which was financed by the Filer's credit facilities (the Acquisition).

5. Under Part 8 of Regulation 51-102, the Filer is required to file a BAR for any completed acquisition that is determined to be a significant acquisition based on the acquisition satisfying any of the three significance tests set out in subsection 8.3(2) of Regulation 51-102.

6. The Acquisition is not a "significant acquisition" under the "asset test" as the value of the consolidated assets of Orchids set out in the audited financial statements as at December 31, 2018 represented approximately 9.0% of the consolidated assets of the Filer as of December 31, 2018.

7. The Acquisition is not a "significant acquisition" under the "investment test" as the consolidated investments in and advances to Orchids as at the acquisition date represented approximately 6% of the consolidated assets of the Filer as at December 31, 2018.

8. The Acquisition is, however, a "significant acquisition" under the "profit or loss test" as the consolidated "specified profit or loss" of Orchids set out in the audited financial statements as at December 31, 2018 exceeds 20% of the consolidated "specified profit or loss" of the Filer for the year ended December 31, 2018.

9. When applying the alternative application available under subsection 8.3(8) of Regulation 51-102, the Acquisition would also represent a "significant acquisition" under the "profit or loss test".

10. For the purposes of completing its quantitative analysis of the significance tests set forth in the Application, the Filer has reviewed the principal differences between IFRS as applied by the Filer and US generally accepted accounting principles (US GAAP) as applied by Orchids. The differences between US GAAP and IFRS would not be significant to the quantitative analysis presented in the Application.

11. The Filer does not believe that the Acquisition is significant from a practical, commercial, business or financial perspective.

12. The Filer has provided the principal regulator with additional operating measures that demonstrate the non-significance of the Acquisition to the Filer. These operating measures compared sales and manufacturing and converting capacity (in short tons) of Orchids to that of the Filer. The results of those measures are generally consistent with the results of the "asset test" and the "investment test".

13. 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", "investment test" and the additional operating measures.

14. Overall, the Filer is of the view that the "asset test" and the "investment test" and other metrics provided by the Filer more accurately reflect the significance of the Acquisition to the Filer from a practical, commercial, business or financial perspective.

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.

"Lise-Estelle Brault"

Senior Director, Fintech, Innovation and Derivatives

Autorité des marchés financiers