Securities Law & Instruments

Headnote

Section 6.1 of NI 62-104 -- Issuer bid -- relief from requirements applicable to issuer bids in Part 2 of NI 62-104 -- issuer proposes to repurchase 1,300,000 of its common shares at a discount to market price from a related party -- the subject shares represent less than 1% of the issuer's outstanding shares -- the repurchase is an exempt related party transaction under MI 61-101 -- selling shareholder is not able to sell shares into the market and is required to restrict sales to persons that are related to it or else put the tax-deferred nature of the butterfly reorganization at risk, to the detriment of the issuer and all other shareholders -- repurchase was reviewed, negotiated and unanimously approved by issuer's independent directors with the support of a financial advisor -- shares are highly liquid securities and the purchase price will be at a discount to the prevailing market price of the shares so other shareholders will be able to sell their shares in the market at a higher price than what the selling shareholder is receiving from the issuer -- share repurchase is exempt from the requirements applicable to issuer bids in Part 2 of NI 62-104, subject to conditions, including that, the repurchase is announced at least two clear trading days before it is completed so that the purchase price takes into account any changes in the market price following announcement of the repurchase.

Statutes Cited

National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c.S.5, AS AMENDED AND IN THE MATTER OF GEORGE WESTON LIMITED

ORDER (Section 6.1 of National Instrument 62-104)

UPON the application (the "Application") of George Weston Limited ("GWL") to the Ontario Securities Commission (the "Commission") for an order of the Commission pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids ("NI 62-104") exempting GWL from the requirements applicable to issuer bids in Part 2 of NI 62-104 (the "Issuer Bid Requirements") in respect of the proposed purchase by GWL of 1,300,000 of GWL's common shares (the "Subject Shares") in one trade executed following the close of markets on December 21, 2020 (the "GWL Transaction") from 1283837 Ontario Limited, an entity controlled by W. Galen Weston (the "Weston Entity", and together with the other entities controlled by W. Galen Weston, the "Weston Control Group");

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

AND UPON GWL (and the Weston Control Group in respect of paragraphs 6, 7, 13, 15, 16, 17, 21, and 31, as they relate to the Weston Entity or the Weston Control Group) having represented to the Commission that:

1. GWL is a corporation existing under the Canada Business Corporations Act and is in good standing.

2. The registered and head office of GWL is located at 22 St. Clair Avenue East, Suite 700, Toronto, Ontario, Canada, M4T 2S5.

3. GWL is a reporting issuer in each of the provinces and territories of Canada, and is not in default of any requirements under applicable securities legislation or the rules and regulations made pursuant thereto in the jurisdictions in which it is a reporting issuer.

4. The authorized share capital of GWL consists of an unlimited number of common shares (the "GWL Shares"), up to 10,000,000 preferred shares, series I ("GWL Series I Preferred Shares"), up to 10,600,000 preferred shares, series II ("GWL Series II Preferred Shares"), up to 10,000,000 preferred shares, series III ("GWL Series III Preferred Shares"), up to 8,000,000 preferred shares, series IV ("GWL Series IV Preferred Shares"), and up to 8,000,000 preferred shares, series V ("GWL Series V Preferred Shares"). As of December 7, 2020, there were 153,670,563 GWL Shares, 9,400,000 Series I Preferred Shares, no Series II Preferred Shares, 8,000,000 Series III Preferred Shares, 8,000,000 Series IV Preferred Shares, and 8,000,000 Series V Preferred Shares issued and outstanding.

5. The GWL Shares, GWL Series I Preferred Shares, GWL Series III Preferred Shares, GWL Series IV Preferred Shares, and GWL Series V Preferred Shares are listed on the Toronto Stock Exchange (the "TSX") under the symbols "WN", "WN.PR.A", "WN.PR.C", "WN.PR.D", and "WN.PR.E", respectively.

6. W. Galen Weston is the controlling shareholder of GWL. As of December 7, 2020, the Weston Control Group beneficially owned or had control or direction over an aggregate of 81,706,054 GWL Shares (which include the Subject Shares), representing approximately 53.2% of the issued and outstanding GWL Shares. All of the Subject Shares are held by the Weston Entity in the Province of Ontario.

7. GWL is the controlling shareholder of Loblaw Companies Limited ("Loblaw"). As of December 7, 2020, GWL was the beneficial owner of an aggregate of 184,020,849 common shares of Loblaw (the "Loblaw Shares"), representing approximately 52.2% of the issued and outstanding Loblaw Shares. Through his control of GWL, W. Galen Weston also controls Loblaw.

8. Pursuant to a "Notice of Intention to Make Normal Course Issuer Bid" dated May 21, 2020 that was filed with, and accepted by, the TSX, GWL is permitted to make purchases of up to 7,683,528 GWL Shares, representing approximately 5% of outstanding GWL Shares as at the date specified in the notice, pursuant to a normal course issuer bid (the "GWL NCIB") during the 12-month period beginning on May 25, 2020 and ending on May 24, 2021. As at December 7, 2020, no GWL Shares have been acquired under the GWL NCIB.

9. To the best of GWL's knowledge, as of December 7, 2020, the "public float" for the GWL Shares represented approximately 46.5% of all issued and outstanding GWL Shares for purposes of the TSX rules governing normal course issuer bids (the "TSX NCIB Rules").

10. The GWL Shares are "highly-liquid securities" within the meaning of section 1.1 of Commission Rule 48-501 Trading during Distributions, Formal Bids and Share Exchange Transactions ("Rule 48-501") and section 1.1 of the Universal Market Integrity Rules ("UMIR").

11. On November 1, 2018, Loblaw spun out its approximate 61.6% effective interest in Choice Properties Real Estate Investment Trust ("Choice REIT") by way of a butterfly reorganization (the "Butterfly Reorganization"). In connection with the Butterfly Reorganization, holders of Loblaw Shares (the "Loblaw Shareholders") other than GWL received 0.135 of a GWL Share for each Loblaw Share held, which was equivalent to the market value of their pro rata interest in Choice REIT, and GWL received Loblaw's approximate 61.6% effective interest in Choice REIT.

12. The Butterfly Reorganization was the only form of spin-out that could be implemented on a basis that was tax efficient for both Loblaw and its Canadian shareholders. At the time of announcement of the Butterfly Reorganization, Loblaw's interest in Choice REIT had an embedded deferred liability for Canadian income tax purposes in an amount of approximately $640 million. Had Loblaw spun-out, or directly distributed, its interest in Choice REIT to all Loblaw Shareholders, Loblaw would have triggered that entire tax liability for itself, to the detriment of Loblaw Shareholders in an implied amount of approximately $1.70 per Loblaw Share. In addition, such a direct distribution would generally have been taxable to Loblaw Shareholders as a dividend.

13. The Weston Control Group has indicated to GWL that it wishes to sell 1,300,000 Subject Shares held by the Weston Entity. The Weston Control Group confirmed that these sales are part of an internal reorganization of W. Galen Weston's holdings and that the Weston family intends to maintain its control position in GWL.

14. The Subject Shares represent approximately 0.85% of the issued and outstanding GWL Shares as at December 7, 2020.

15. The Weston Control Group has also indicated to Loblaw that it wishes to sell 3,269,208 Loblaw Shares held by the Weston Entity as part of an internal reorganization of W. Galen Weston's holdings. Loblaw has also made an application to the Commission for an order of the Commission pursuant to section 6.1 of NI 62-104 exempting Loblaw from the Issuer Bid Requirements in respect of the proposed purchase by Loblaw of 3,269,208 Loblaw Shares from the Weston Entity on substantially the same terms as the GWL Transaction.

16. For the purposes of the "butterfly" rules in section 55 of the Income Tax Act (the "Tax Act"), if a "specified shareholder" (for the purposes of those rules) sells GWL Shares or Loblaw Shares to an unrelated person or partnership in certain circumstances, this could cause the Butterfly Reorganization to become taxable to GWL and Loblaw and each of them would be liable for a substantial amount of tax. The members of the Weston Control Group, including the Weston Entity, are "specified shareholders" for the purposes of the "butterfly" rules in section 55 of the Tax Act.

17. The Weston Entity could effect the sale of the Subject Shares in the open market in reliance on the exemption for a trade by a control person provided in National Instrument 45-102 Resale of Securities (the "NI 45-102 Exemption"). However, as a result of the Butterfly Reorganization and in order to not put the tax-deferred nature of the Butterfly Reorganization at risk, the Weston Entity is unable to sell the Subject Shares into the market and must restrict sales to persons that are related to it. Accordingly, the NI 45-102 Exemption is not available to facilitate the sale of the Subject Shares. As the only practical alternative, the Weston Control Group approached GWL to ask GWL to consider repurchasing the Subject Shares.

18. The GWL Transaction will be executed at a price that is 97% of the lesser of: (a) the volume weighted average price (the "VWAP") of the GWL Shares on the TSX for the 20 trading days immediately prior to the date the GWL Transaction is agreed to; and (b) the VWAP of the GWL Shares on the TSX for the two trading days immediately prior to completion of the GWL Transaction (the "Purchase Price"). Other than the Purchase Price, no fee or other consideration will be paid by GWL in connection with the GWL Transaction.

19. The GWL Transaction was reviewed, negotiated and unanimously approved by the independent directors of GWL (the "Independent Directors"), and Scotia Capital Inc. (the "Financial Advisor") was engaged to provide financial advice to support this process. The board of GWL approved the GWL Transaction (with Galen G. Weston and Paviter S. Binning abstaining from the vote) on the basis of the unanimous recommendation of the Independent Directors.

20. As the Weston Entity is willing to sell the Subject Shares at a discount to the prevailing market price of the GWL Shares, GWL has determined that (a) it would be advantageous to purchase the Subject Shares from a pricing, volume and timing perspective, (b) it will be able to purchase the Subject Shares at a lower per share price than the price that it would be able to purchase GWL Shares under the GWL NCIB, and (c) the purchase of Subject Shares is in the best interests of GWL and the holders of GWL Shares (the "GWL Shareholders"), constitutes a desirable use of GWL's funds and would not impose an imprudent financial burden on GWL.

21. Other than the Subject Shares, (a) GWL has no current plans to repurchase any GWL Shares from the Weston Control Group, and (b) the Weston Control Group has no current plans to sell any GWL Shares.

22. The GWL Transaction was not proposed or agreed to with the intention of conferring preferential treatment to the Weston Control Group and the Financial Advisor has advised that the GWL Transaction does not confer preferential treatment on the Weston Control Group from a financial perspective. In particular, the Financial Advisor has advised that if the Weston Entity was to sell the Subject Shares into the market, it would be able to do so at less than a 3% discount. In addition, other than accommodating the Butterfly Reorganization considerations set out above, the tax result of the GWL Transaction is expected to be effectively the same for the Weston Entity as if it sold the Subject Shares into the market.

23. The purchase of Subject Shares will not adversely affect GWL or the rights of any of GWL's security holders and will not materially affect control of GWL. The GWL Transaction will not prejudice the ability of other GWL Shareholders to otherwise sell GWL Shares in the open market at the prevailing market price.

24. Following the receipt of this Order, and prior to or upon GWL entering into the definitive agreement with respect to the GWL Transaction, GWL will issue and file a press release (the "Press Release") that: (a) describes the GWL Transaction (including the terms of this Order); and (b) states that, immediately following the completion of the GWL Transaction, GWL will file a report on SEDAR indicating the aggregate dollar amount paid for the Subject Shares pursuant to the GWL Transaction.

25. The Press Release will be issued and filed at least two clear trading days prior to the completion of the GWL Transaction.

26. Immediately following the completion of the GWL Transaction, GWL will file a report on SEDAR indicating the aggregate dollar amount paid for the Subject Shares pursuant to the GWL Transaction.

27. GWL and the entities in the Weston Control Group, including the Weston Entity, are "related parties" and the GWL Transaction would be a "related party transaction" for the purposes of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101").

28. Paragraphs 5.5(a) and 5.7(1)(a) of MI 61-101 (the "25% Market Cap Exemption") exempts related party transactions from the valuation and minority approval requirements if, at the time the transaction is agreed to, neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the transaction, insofar as it involves interested parties, exceeds 25% of the issuer's market capitalization. The GWL Transaction is able to satisfy the conditions of the 25% Market Cap Exemption and accordingly, GWL is relying on same in respect of the GWL Transaction.

29. But for the fact that the Purchase Price will be at a discount to the prevailing market price and below the prevailing bid-ask price for the GWL Shares on the TSX at the time of the GWL Transaction, GWL could otherwise acquire the Subject Shares through the facilities of the TSX as a "block purchase" under the GWL NCIB in accordance with the block purchase exception in paragraph 629(1)7 of the TSX NCIB Rules and the exemption from the Issuer Bid Requirements set out in subsection 4.8(2) of NI 62-104.

30. In accordance with the requirements of the TSX, the Subject Shares repurchased under the GWL Transaction will be taken into account by GWL when calculating the maximum annual aggregate limit that is imposed upon the GWL NCIB. After the 1,300,000 Subject Shares are repurchased under the GWL Transaction, GWL will still be able to purchase 6,383,528 GWL Shares under the GWL NCIB.

31. At the time that the definitive agreement in respect of the GWL Transaction is entered into, and at the time that the GWL Transaction is completed, neither GWL, any member of the Weston Control Group, nor any of their respective personnel who negotiated the definitive agreement or made, participated in the making of, or provided advice in connection with the decision to enter into the GWL Transaction, will be aware of any "material change" or any "material fact" (each as defined in the Securities Act (Ontario) (the "Act")) in respect of GWL or the GWL Shares that has not been generally disclosed.

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

IT IS ORDERED pursuant to section 6.1 of NI 62-104 that GWL be exempt from the Issuer Bid Requirements in connection with the GWL Transaction, provided that:

(a) following the receipt of this Order, and prior to or upon GWL entering into the definitive agreement in respect of the GWL Transaction, GWL issues and files the Press Release;

(b) the Press Release is issued and filed at least two clear trading days prior to the completion of the GWL Transaction;

(c) the Subject Shares will be repurchased by GWL from the Weston Entity for a per share purchase price equal to 97% of the lesser of: (i) the VWAP of the GWL Shares on the TSX for the 20 trading days immediately prior to the date the GWL Transaction is agreed to, and (ii) the VWAP of the GWL Shares on the TSX for the two trading days immediately prior to completion of the GWL Transaction;

(d) immediately following the completion of the GWL Transaction, GWL files a report on SEDAR indicating the aggregate dollar amount paid for the Subject Shares pursuant to the GWL Transaction;

(e) at the time that the definitive agreement in respect of the GWL Transaction is entered into, and at the time that the GWL Transaction is completed, the GWL Shares are "highly-liquid securities" within the meaning of section 1.1 of Rule 48-501 and section 1.1 of UMIR; and

(f) at the time that the definitive agreement in respect of the GWL Transaction is entered into, and at the time that the GWL Transaction is completed, neither GWL, any member of the Weston Control Group, nor any of their respective personnel who negotiated the definitive agreement or made, participated in the making of, or provided advice in connection with the decision to enter into the GWL Transaction, is aware of any "material change" or any "material fact" (each as defined in the Act) in respect of GWL or the GWL Shares that has not been generally disclosed.

DATED at Toronto this 17th day of December, 2020.

"Jason Koskela"
Acting Director, Office of Mergers & Acquisitions
Ontario Securities Commission