NP 11-203 – MI 61-101 – take-over bid and subsequent business combination – MI 61-101 requires sending of information circular and holding of meeting in connection with second step business combination – target’s declaration of trust provides that a resolution in writing executed by unitholders holding more than 66 2/3% of the outstanding units valid as if such voting rights had been exercised at a meeting of unitholders – relief granted from requirement that information circular be sent and meeting be held – minority approval to be obtained if required under 61-101, albeit in writing rather than at a meeting of unitholders.
Applicable Legislative Provisions
Multilateral Instrument 11-102 – Passport System
National Policy 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdiction
MI 61-101 – Protection of Minority Security Holders in Special Transactions
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction)
AND
IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATION IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF THE TAKE-OVER BID FOR SLEEP COUNTRY CANADA INCOME FUND BY 7019416 CANADA INC. (the Filer)
DECISION
Background
The principal regulator (the “Principal Regulator”) in the Jurisdiction has received an application from the Filer, in connection with a take-over bid (the “Offer”) for Sleep Country Canada Income Fund (“Sleep Country”), for a decision pursuant to the securities legislation of the Jurisdiction (the “Legislation”) that the requirements of the Legislation that:
a Compulsory Acquisition or Subsequent Acquisition Transaction (each as defined below), as applicable, be approved at a meeting of the unitholders of Sleep Country (the “Unitholders”); and
an information circular be sent to the Unitholders in connection with either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable;
be waived (collectively, the “Exemption Sought”).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(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 Quebec.
Interpretation
Defined terms contained in National Instrument 14-101 and MI 11-102 have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following representations by the Filer:
The Filer was incorporated under the Canada Business Corporations Act on July 30, 2008. The Filer’s registered and head office is located at 100 Wellington Street West, CP Tower, Suite 2300, P.O. Box 22, Toronto, Ontario and the Filer is not a reporting issuer. The Filer is owned by Birch Hill Feather LP and Birch Hill Feather US LP (which limited partnerships are managed by Birch Hill Equity Partners Management Inc.) and Westerkirk Capital Inc.
Sleep Country is an open-ended limited purpose trust established on March 5, 2003 under the laws of the Province of Ontario by a declaration of trust, as amended and restated on April 13, 2003 (the “Declaration Trust”). The registered and head office of Sleep Country is located at 140 Wendell Avenue, Unit #1, Toronto, Ontario. Sleep Country is a reporting issuer or the equivalent in all of the provinces and territories of Canada and files its continuous disclosure documents with the Canadian securities regulatory authorities. The outstanding units of Sleep Country (the “Units”) are listed on the Toronto Stock Exchange under the symbol Z.UN.
The Units are held by CDS Clearing and Depository Services Inc. in book-entry only form.
Pursuant to the requirements of National Policy 11-203 and MI 11-102, the Ontario Securities Commission is the principal regulator to review and grant the Exemption Sought as the head office of Sleep Country is located in Ontario.
Pursuant to the take-over bid circular dated August 18, 2008 (the “Circular”) mailed to the Unitholders and to holders of securities convertible into Units, in connection with the Offer:
(a) the Offer is for all of the outstanding Units at a price of $22.00 in cash per Unit;
(b) one of the conditions of the Offer is that the number of Units, which together with the Units owned (i) by the Filer and any of its affiliates and (ii) by Christine Magee and Stephen Gunn, the President and Chief Executive Officer of Sleep Country Canada Inc., respectively (collectively, the “Senior Officers”), represent at least 66⅔% of the outstanding Units on a fully-diluted basis shall have been validly deposited under the Offer and not withdrawn at the expiry of the Offer;
(c) if the conditions to the Offer are satisfied (or waived by the Filer) and the Filer takes up and pays for the Units deposited pursuant to the Offer, the Filer may proceed with a compulsory acquisition of the Units not deposited to the Offer (a “Compulsory Acquisition”) as permitted by Sleep Country’s Declaration of Trust for the same consideration per Unit as was paid under the Offer, if within 120 days after the date of the Offer, the Offer is accepted by Unitholders holding not less than 90% of the Units (other than Units held at the date of the Offer by or on behalf of the Filer or an affiliate or an associate of the Filer or persons acting jointly or in concert with the Filer);
(d) in connection with either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction (as defined below), the Filer currently intends to amend the Declaration of Trust by the Written Resolution (as defined below) to provide that non-tendering offerees will be deemed to have elected to transfer and to have transferred their Units to the Filer immediately on the giving of the Filer’s notice prescribed by the Declaration of Trust notifying non-tendering offerees that, among other things, the Filer is entitled to acquire their Units by way of Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable (as opposed to 20 days after sending of an Filer’s notice, as currently provided) (the “Notice Amendment”);
(e) if a Compulsory Acquisition as permitted under the Declaration of Trust is not available to the Filer or the Filer elects not to proceed under those provisions, the Filer currently intends to acquire the Units not deposited to the Offer (other than those held by its affiliates and the Senior Officers) by:
(i) causing the Declaration of Trust to be amended as permitted pursuant to its terms (the “Threshold Amendment”) to provide that a transaction to acquire all of the Units not tendered to the Offer which could include, (a) the redemption of all of the outstanding Units (other than Units designated by the Filer) at the Offer Price, (b) amendments to the Declaration of Trust to facilitate the implementation of such transactions and consequential matters (including amendments to permit or provide for the compulsory acquisition by the Filer of the Units and/or the redemption of the Units) and (c) a meeting and/or written resolutions of Unitholders to approve such transactions, the amendments to the Declaration of Trust and consequential matters and which may be effected by way of arrangement, amalgamation, merger, reorganization, consolidation, recapitalization or other transaction involving Sleep Country, its affiliates and the Filer or an affiliate of the Filer (a “Subsequent Acquisition Transaction”) may be effected if the Filer, its affiliates and the Senior Officers, after take-up of and payment for the Units deposited under the Offer, hold not less than 66⅔% of the Units calculated on a fully-diluted basis or to make such other amendment as is necessary and permitted under the Declaration of Trust, in order to provide for the acquisition of the Units not deposited to the Offer in each case at the same price as the price paid under the Offer;
(ii) causing the Declaration of Trust to be amended as permitted pursuant to its terms (the “Acquisition Amendment”) to provide that the Filer may exclude Units held by its affiliates and the Senior Officers from the Units to be transferred to the Filer pursuant to the giving of the Filer’s notice prescribed by the Declaration of Trust, as amended by the Notice Amendment; and
(iii) proceeding with a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction in respect of the Units not deposited to the Offer as permitted by the Declaration of Trust as amended by the Notice Amendment, the Threshold Amendment and the Acquisition Amendment:
(f) in order to effect either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction in accordance with the foregoing, rather than seeking the Unitholders’ approval at a special meeting of the Unitholders to be called for such purpose, the Filer intends to rely on section 12.10 of the Declaration of Trust, which specifies that a resolution in writing (the “Written Resolution”) circulated to all Unitholders and executed by Unitholders holding more than 66⅔% of the outstanding Units entitled to be voted on such resolution, if such resolution is a special resolution, is as valid and binding as if such resolution had been passed at a meeting of Unitholders duly called for the purpose; which Written Resolution will approve, among other things, the Notice of Amendment, the Threshold Amendment, the Acquisition Amendment and any Compulsory Acquisition or Subsequent Acquisition Transaction undertaken in accordance therewith, as applicable;
(g) if the Filer is unable to effect either the Compulsory Acquisition or the Subsequent Acquisition Transaction in the manner described above, the Filer reserves the right, to the extent permitted by applicable law and subject to the terms and conditions of the Support Agreement made as of August 14, 2008 between Sleep Country and the Filer (a copy of which will be filed on SEDAR on August 18, 2008) to (i) purchase additional Units in the open market or in privately negotiated transactions, in another take-over bid or exchange offer or otherwise or from Sleep Country, or (ii) take no further action to acquire additional Units. Alternatively, the Filer may sell or otherwise dispose of any or all Units acquired pursuant to the Offer or otherwise;
(h) notwithstanding section 12.10 of the Declaration of Trust, in certain circumstances, the Legislation requires that the Compulsory Acquisition or the Subsequent Acquisition Transaction, as applicable, be approved at a meeting of Unitholders called for that purpose;
(i) to effect either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable, the Filer will, if required, obtain minority approval, as that term is defined in the Legislation, calculated in accordance with the terms of Section 8.2 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (the “Minority Approval”), albeit not at a meeting of Unitholders, but by Written Resolution; and
(j) the Circular provided to Unitholders in connection with the Offer contains all disclosure required by applicable securities laws, including without limitation, the disclosure required under the take-over bid provisions and form requirements of applicable securities legislation and the provisions of Multilateral Instrument 61-101 relating to the disclosure required to be included in information circulars distributed in respect of business combinations.
Decision
The Principal Regulator is satisfied that the decision meets the test set out in the Legislation for the Principal Regulator to make the decision.
The decision of the Principal Regulator under the Legislation is that the Exemption Sought is granted provided that Minority Approval, if required, shall have been obtained by Written Resolution.
“Naizam Kanji”
Name: Naizam Kanji
Manager, Ontario Securities Commission