National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- business acquisition report (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.
January 28, 2020
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 OF GDI INTEGRATED FACILITY SERVICES INC. (the Filer)
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) granting relief pursuant to Part 13 of Regulation 51-102 respecting Continuous Disclosure Obligations, CQLR, c. V-1.1, r. 24 (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, through its wholly-owned subsidiary, Ainsworth Inc., of ESC Automation Inc., along with its U.S. subsidiaries, Delta Connects Inc. and New Patriot Energy Inc. (collectively, the Acquired Business) on January 15, 2020 (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
a) the Autorité des marchés financiers is the principal regulator for this application;
b) the Filer has provided notice that Subsection 4.7(1) of Regulation 11-102 respecting Passport System, CQLR, c. V-1.1, r. 1 (Regulation 11-102) is intended to be relied upon in all Jurisdictions of Canada other than Ontario; 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 Regulation 14-101 respecting Definitions, CQLR, c. V-1.1, r. 3, Regulation 11-102 and Regulation 51-102 have the same meaning if used in this decision, unless otherwise defined herein.
This decision is based on the following facts represented by the Filer:
1. The head office of the Filer is located at 695, 90th Avenue, LaSalle, Québec H8R 3A4.
2. The Filer's subordinate voting shares are listed for trading on the Toronto Stock Exchange under the ticker symbol "GDI".
3. The Filer is a reporting issuer in all jurisdictions of Canada and is not in default of securities legislation in any jurisdiction of Canada.
4. On November 28, 2019, the Filer announced that it had entered into an agreement through its wholly-owned subsidiary, Ainsworth Inc., to acquire the Acquired Business for an aggregate purchase price of $73.5 million, subject to certain purchase price adjustments (the Acquisition). The Acquisition closed on January 15, 2020.
5. Under Part 8 of Regulation 51-102, the Filer is required to file a BAR for any completed acquisition which is considered a significant acquisition if the acquisition meets one of the three significance tests provided for in subsection 8.3(2) of Regulation 51-102.
6. The Acquisition is not a "significant acquisition" under the "Asset Test" as the consolidated assets of the Acquired Business as of February 28, 2019 represented approximately 9.7% 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 total consideration paid for the Acquired Business represented approximately 12.7% of the consolidated assets of the Filer as of December 31, 2018.
8. The Acquisition is however a "significant acquisition" under the "Profit or Loss Test", as the "specified profit or loss" of the Acquired Business as of February 28, 2019 was approximately 41.3% of the "specified profit or loss" of the Filer as of December 31, 2018.
9. For the purposes of its quantitative analysis under the significance tests, the Filer utilized its financial statements and those of the Acquired Business, both prepared in accordance with International Financial Reporting Standards (IFRS).
10. The Filer does not believe (nor did it believe at the time it entered into an agreement with respect to the Acquisition) that the Acquisition is significant to it from a commercial, business, practical or financial perspective.
11. The Filer has provided the principal regulator with additional financial and operational measures which demonstrate the lack of significance of the Acquisition for the Filer. All these measures are generally important metrics for the Filer and the industry in which it operates, which further demonstrate the insignificance of the Acquisition to the Filer. These additional financial and operational measures include, among others, revenues and market capitalization and the results of those measures are generally consistent with the results of the "Asset Test" and the "Investment Test".
12. The application of the "Profit or Loss Test" to the Acquisition produces an anomalous result because the significance of the Acquisition is exaggerated and out of proportion to its significance to the Filer on an objective basis compared to the results of the "Asset Test" and the "Investment Test".
13. The Filer is of the view that the "Asset Test", the "Investment Test" and the additional financial and operational measures supplied by the Filer more accurately reflect the significance of the Acquisition to the Filer from a commercial, business, practical and financial perspective.
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.