Headnote
National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions – Exemption granted to an offeror from take-over bid requirements in connection with the acquisition by the offeror of all of the outstanding shares of the offeree issuer – offeree issuer conducts business through a network of financial advisors – financial advisors are shareholders of the offeree issuer – exemption granted on the basis that the representations of the offeror and the conditions to the exemption are substantially similar to the statutory non-reporting issuer exemption except that financial advisors are treated similarly to employees for the purposes of satisfying the requirements of the non-reporting issuer exemption.
Applicable Legislative Provisions
Securities Act,R.S.O. 1990, c.S.5, as am.,
Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions
IN THE MATTER OF THE SECURITIES LEGISLATION OF THE PROVINCE OF ONTARIO (the Jurisdiction)
AND
IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF IGM FINANCIAL INC. (the Filer)
Background
The principal regulator in the Jurisdiction has received an application from the Filer:
(a) for a decision under the securities legislation of the Jurisdiction (the Legislation) that the take-over bid requirements contained in the Legislation (the Takeover Bid Provisions) and the requirements related to insider bids set out in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (the Insider Bid Provisions, and collectively with the Takeover Bid Provisions, the Takeover Bid Requirements) do not apply in connection with the acquisition by the Filer of all of the issued and outstanding common shares of Investment Planning Counsel Inc. (IPCI) not already held by the Filer (the Bid); and
(b) for a decision under the Legislation that the application and this decision (the Confidential Material) be kept confidential and not be made public until the earlier of: (i) the date on which the Filer mails the offer document to the holders of the common shares of IPCI; (ii) the date the Filer advises the principal regulator that there is no need for the application and this decision to remain confidential; and (iii) the date that is 30 days after the date of this decision.
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 section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in the Province of Manitoba.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer was incorporated under the Canada Business Corporations Act (the CBCA) on August 3, 1978 and its capital structure was reorganized by Articles of Amendment effective September 19, 1986. Its name was changed to “IGM Financial Inc.” by Articles of Amendment effective April 30, 2004 and its Articles were re-stated effective April 30, 2004. The Filer’s registered and head office is located in Winnipeg, Manitoba.
2. The Filer is a reporting issuer, or its equivalent, in all of the provinces and territories of Canada.
3. The Filer’s common shares and preferred shares, series A are listed on the Toronto Stock Exchange under the symbols “IGM” and “IGM.PR.A”, respectively.
4. The Filer is not on the list of defaulting reporting issuers, or its equivalent, in any jurisdiction in which such a list is maintained.
5. IPCI was incorporated under the CBCA on February 10, 2004 and its capital structure was reorganized by Articles of Amendment effective February 20, 2004 by the addition of an unlimited number of preference shares, issuable in series. By Articles of Amendment effective July 26, 2004, IPCI changed its name from “4221079 Canada Inc.” to “Investment Planning Counsel Inc.”
6. IPCI’s registered and head office is located in Toronto, Ontario.
7. IPCI is not and has never been a reporting issuer, or its equivalent, in any of the provinces or territories of Canada. IPCI’s securities have never been listed or posted for trading on any exchange or marketplace.
8. The authorized share capital of IPCI consists of an unlimited number of common shares (the Shares) and an unlimited number of preference shares, issuable in series of which 67,470,938 Shares and no preference shares are issued and outstanding as at April 1, 2009. IPCI and its subsidiaries presently conduct, and will continue to conduct, business across Canada through a network of financial advisors (the Advisors).
9. The Bid will be made by the Filer pursuant to an offer document to be delivered to the Shareholders of IPCI (the IPCI Minority Shareholders). The offer document will contain information with respect to (i) the Filer as the offeror; (ii) the consideration being offered for each Share; (iii) the reasons for the offer; (iv) the mechanics of accepting the offer; (v) the conditions to the offer; and (vi) other material information. The offer will be open for acceptance for a period of 30 days and contain a condition, amongst others, that not less than 90% of the Shares not already owned by the Filer be deposited to the Bid and not be withdrawn.
10. The consideration to be offered by the Filer under the Bid for each Share will, at the election of each IPCI Minority Shareholder, be cash, common shares of the Filer or any combination of the two, subject to pro-ration if the IPCI Minority Shareholders elect cash in an aggregate amount which exceeds the maximum amount of cash established by the Filer to purchase Shares not owned by the Filer. The price per Share to be paid under the Bid will exceed the price per Share that would currently apply if the Shares were purchased under the Shareholders’ Agreements (as defined in paragraph 16 below) without taking into account any contingent price adjustments that are provided for in the Shareholders’ Agreements referred to below. For this purpose, each common share of the Filer will be valued at an amount equal to the closing price of the common shares of the Filer prior to the date on which the price is established.
11. As at April 1, 2009, IPCI has 81 registered shareholders. The Filer holds 50,184,397 Shares, or 74.4% of the issued and outstanding Shares, and a convertible debenture in the principal amount of $48,750,000 maturing on May 10, 2012 which is exercisable into Shares at a conversion price of $1.95 per Share. The balance of the remaining 17,286,541 Shares, or 25.6% of the issued and outstanding Shares are beneficially held either directly or indirectly by the management, current employees, former employees, current Advisors and former Advisors of IPCI or its affiliates and, in a limited number of instances, by an associate of an Advisor. Not including the Filer, to the best knowledge of IPCI, there are currently 100 beneficial holders of Shares, residing in the following Provinces:
(a) 72 reside in Ontario, holding 15,075,895 Shares;
(b) 6 reside in Manitoba, holding 969,942 Shares;
(c) 12 reside in Nova Scotia, holding 1,030,084 Shares;
(d) 8 reside in British Columbia, holding 195,327 Shares; and
(e) 2 reside in Newfoundland and Labrador, holding 15,293 Shares.
Including the Filer, there are 7 beneficial shareholders of IPCI residing in Manitoba, holding a total of 51,154,339 Shares. The knowledge of IPCI as to the number of beneficial shareholders is based on the fact that the beneficial shareholders of IPCI are parties to the Shareholders’ Agreements (as defined in paragraph 16 below). The Bid is exempt from Part 2 of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids (MI 62-104) in the Provinces of Nova Scotia, British Columbia and Newfoundland and Labrador pursuant to section 4.5 of MI 62-104 by virtue of the fact that the number of beneficial holders of Shares in each such Province is fewer than 50, constituting less than 2% of the outstanding Shares.
12. All Advisors have a written contract with IPCI or a subsidiary of IPCI pursuant to which they devote a substantial amount of their time and attention to the business of IPCI and its subsidiaries.
13. Up to 4,905,794 additional Shares are issuable under stock options granted under IPCI’s stock option plan to employees and executive officers of IPCI and its subsidiaries, of which 2,383,918 stock options have vested as at April 1, 2009. As part of the Bid, the Filer will provide all holders of stock options, both vested and unvested, with the opportunity to receive new stock options to be granted by the Filer under the Filer’s stock option plan upon the successful completion of the Bid in exchange for IPCI stock options.
14. Under an Advisor share ownership program introduced by IPCIC (as defined below) and certain of its affiliates in June 1999, up to 142,399 additional Shares are issuable as at April 1, 2009 to 6 IPCI Minority Shareholders who also hold Class A Shares (the IPCIC Class A Shares) in the capital of IPC Investment Corporation (IPCIC), an indirect wholly-owned subsidiary of IPCI and a mutual fund dealer and limited market dealer registered in each of the provinces and territories of Canada. The IPCIC Class A Shares are subject to escrow agreements in favour of IPCIC and are either exchangeable into Shares in accordance with an established formula as and when such escrowed shares are released from escrow or may be purchased for cancellation by IPCIC for nominal consideration in the event that certain established requirements are not met. The escrow provisions vary for each IPCI Minority Shareholder who participated in the program. The last of such escrowed IPCIC Class A Shares is to be released or purchased for cancellation in June 2011. As the escrow agreements do not provide a mechanism for depositing Shares to the Bid, as part of the Bid, IPCI will offer to such IPCI Minority Shareholders the opportunity to exchange their escrowed IPCIC Class A Shares for Shares in advance of the date upon which they would otherwise be entitled to exchange their IPCIC Class A Shares and to deposit the Shares received upon such exchange to the Bid. The consideration receivable by an IPCI Minority Shareholder under the Bid for such Shares will not be required to be escrowed.
15. Under a second Advisor share ownership program introduced by IPCI and certain of its affiliates in June 2007, 1,293,996 of the Shares held by 23 IPCI Minority Shareholders are subject to escrow agreements in favour of IPCI as at April 1, 2009. The escrowed Shares are either periodically released from escrow, or if certain established requirements are not met, may be purchased for cancellation by IPCI for nominal consideration. The escrow provisions vary for each IPCI Minority Shareholder who participates in this program. The last of such escrowed Shares is to be released or purchased for cancellation in June 2013. As the escrow agreements do not provide a mechanism for depositing the escrowed Shares to the Bid, as part of the Bid, IPCI will offer to such IPCI Minority Shareholders, the opportunity to deposit the Shares to the Bid. The consideration receivable by an IPCI Minority Shareholder under the Bid for such Shares will not be required to be escrowed.
16. Under shareholders’ agreements in respect of IPCI dated February 24, 2004 and May 10, 2004 (together, the Shareholders’ Agreements), IPCI Minority Shareholders possess the benefit of, and are subject to, certain share transfer rights and obligations. The terms of the Shareholders’ Agreements include: (i) the right of each IPCI Minority Shareholder to cause IPCI, the Filer or an affiliate of the Filer to purchase its Shares from time to time (the Put Right); and (ii) the right of one or possibly more of IPCI, the Filer or any affiliate of the Filer to purchase the Shares from each IPCI Minority Shareholder from time to time (the Call Right). The price at which shares are purchased under the Put Right or Call Right is determined based on a quarterly calculation prepared by IPCI and is payable in cash. On any exercise of the Call Right, there is a contingent upward adjustment to the price based on the quarterly calculation of the price for the four subsequent quarters following the purchase.
17. The letter of transmittal to be signed by each IPCI Minority Shareholder for the purpose of depositing its Shares will contain an acknowledgement of the IPCI Minority Shareholder that it is aware that it will not receive the benefits of the Takeover Bid Requirements.
18. In accordance with contractual arrangements, IPCI Minority Shareholders who do not deposit their Shares to the Bid will be subject to the provisions of the Shareholders’ Agreements including, without limitation, the Call Right.
19. The Legislation provides an exemption from the Takeover Bid Provisions in respect of a non-reporting issuer if:
(a) the offeree issuer is not a reporting issuer;
(b) there is no published market for the securities that are the subject of the bid; and
(c) the number of security holders of that class of securities at the commencement of the bid is not more than 50, exclusive of holders who (i) are in the employment of the offeree issuer or an affiliate of the offeree issuer, or (ii) were formerly in the employment of the offeree issuer or in the employment of an entity that was an affiliate of the offeree issuer at the time of that employment, and who while in that employment were, and have continued after that employment to be, security holders of the offeree issuer.
20. Given that (i) IPCI is not a reporting issuer, or its equivalent, in any of the provinces or territories of Canada, and (ii) there is no published market in respect of the Shares, if the Advisors were treated in the same manner as employees, the number of holders of the Shares at the commencement of the Bid, exclusive of employees, would be fewer than 50, and the Bid would be exempt from the Takeover Bid Requirements on the basis of the “non-reporting issuer” exemption set out in the Legislation.
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:
(a) the Takeover Bid Provisions shall not apply to the Bid provided that at the time of the Bid:
(i) IPCI is not a reporting issuer;
(ii) there is no published market for the securities that are the subject of the Bid; and
(iii) the number of security holders of the class of voting or equity securities that is subject to the Bid at the commencement of the Bid is not more than 50, exclusive of holders who:
(A) are in the employment of IPCI or an affiliate of IPCI or are Advisors; or
(B) were formerly in the employment of IPCI or in the employment of an entity that was an affiliate of IPCI at the time of that employment, and who while in that employment were, and have continued after that employment to be, security holders of IPCI or were formerly Advisors; and
(b) the Confidential Material will be kept confidential and not be made public until the earlier of: (i) the date on which the Filer mails the offer document to the IPCI Minority Shareholders; (ii) the date the Filer advises the principal regulator that there is no need for the application and this decision to remain confidential; and (iii) the date that is 30 days after the date of this decision.
Dated this 17th day of April, 2009.
“Suresh Thakrar” “Wendell S. Wigle”
______________________________ ______________________________
Commissioner Commissioner
Ontario Securities Commission Ontario Securities Commission
The decision of the principal regulator under the Legislation is that:
(a) the Insider Bid Provisions shall not apply to the Bid provided that, at the time of the Bid, the conditions of the above-noted decision of the principal regulator in respect of the Takeover Bid Provisions are satisfied; and
(b) the Confidential Material will be kept confidential and not be made public until the earlier of: (i) the date on which the Filer mails the offer document to the IPCI Minority Shareholders; (ii) the date the Filer advises the principal regulator that there is no need for the application and this decision to remain confidential; and (iii) the date that is 30 days after the date of this decision.
Dated this 17th day of April, 2009.
“Naizam Kanji”
______________________________ Deputy Director Mergers & Acquisitions Corporate Finance Branch