Headnote Subsection 74(1) -- Application for exemption from prospectus requirement in connection with first trade of shares of issuer through exchange or market outside of Canada or to person or company outside of Canada -- issuer not a reporting issuer in any jurisdiction in Canada -- conditions of the exemption in section 2.14 of National Instrument 45-102 Resale of Securities not satisfied as residents of Canada (including Applicant) own more than 10% of the total number of shares -- relief restricted to securities acquired prior to date of decision -- relief granted subject to conditions, including condition that residents of Canada, excluding the Applicant, do not hold more than 10 percent of the outstanding securities or represent more than 10 percent of the number of securityholders and condition that the first trade be made through an exchange or market outside of Canada or to a person or company outside of Canada
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c.S.5, as am., ss. 53 and 74(1) National Instrument 45-102 Resale of Securities, s. 2.14
Ontario Commission des P.O. Box 55, 19^th^ Floor CP 55, 19e étage
Securities valeurs mobilières 20 Queen Street West 20, rue queen ouest
Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8
In the Matter of
the Securities Act,
R.S.O. 1990, Chapter S. 5 as amended (the Act)
and
In the Matter of
OMERS Administration Corporation
and
OPE AGH Holdings Inc.
ORDER
(Subsection 74(1) of the Act)
WHEREAS OMERS Administration Corporation (the Applicant) and OPE AGH Holdings Inc. (the Applicant’s Subsidiary) have applied (the Application) to the Ontario Securities Commission (the Commission) for an order (the Order) pursuant to subsection 74(1) of the Act that section 53 of the Act will not apply to first trades, as such term is used in National Instrument 45-102 – Resale of Securities (NI 45-102), of:
(i) common shares (Common Shares) of Affinia Group Holdings, Inc. (Affinia) acquired by the Applicant or the Applicant’s Subsidiary prior to the date of this Order; and
(ii) Common Shares acquired by the Applicant or the Applicant’s Subsidiary pursuant to a conversion or exchange from convertible or exchangeable securities acquired by the Applicant or the Applicant’s Subsidiary prior to the date of this Order;
(the Exemption Sought).
And WHEREAS the Applicant and the Applicant’s Subsidiary have requested that the Application, the supporting materials and this Order (collectively, the Confidential Material) be kept confidential until the earliest of: (a) the date on which the Affinia consummates the IPO (as defined herein); (b) the date the Applicant advises the principal regulator in writing that there is no longer any need for the application and this Order to remain confidential; and (c) the date that is 90 days after the date of this Order (the Request for Confidentiality);
AND WHEREAS the Applicant and the Applicant’s Subsidiary having represented to the Commission that:
The Applicant is a corporation without share capital created pursuant to Section 32 of the Ontario Municipal Employees Retirement System Act, 2006 (the OMERS Act). The Applicant is the administrator of the OMERS pension plans as defined in the OMERS Act and is responsible for managing the funds of the pension plans. The head office of the Applicant is located at One University Avenue, Toronto, Ontario, Canada.
Affinia, incorporated under the laws of the State of Delaware and formed on July 6, 2004, has operations in North and South America, Europe, Asia and India. Affinia designs, manufactures, distributes and markets vehicle replacement products and services, including extensive offerings of aftermarket parts for heavy and medium duty trucks, light vehicles, equipment in the off-highway market (i.e. construction, mining, forestry and agricultural) and equipment for industrial and marine applications. The head office of Affinia is located at 1101 Technology Drive, Ann Arbor, Michigan, USA.
Through its Canadian subsidiary, Affinia Canada ULC, Affinia has three operations in Ontario, Canada. Affinia Canada ULC (i) owns the Brake & Chassis manufacturing facility in Guelph, Ontario; (ii) leases a warehouse in Ayr, Ontario; and (iii) has its main office and distribution facility in Mississauga, Ontario.
As at December 31, 2010, Affinia’s total current assets for its U.S. operations were US$1,043,063,788 and total current assets for its worldwide operations equalled US$1,593,536,594. Total current assets from Affinia’s Canadian operations were US$36,083,150, representing approximately 3% of its U.S. operations and about 2% of its worldwide operations.
In terms of revenue, Affinia’s U.S. operations for year ended 2010 yielded US$1,254,455,086 in net sales. Its worldwide operations yielded US$1,991,679,373 in net sales. Net sales from Affinia’s Canadian subsidiary were $182,622,280, which represents approximately 14.5% of total U.S. sales and about 9% of total net sales worldwide.
Investment funds controlled by affiliates of The Cypress Group LLC (Cypress) hold approximately 61% of the Common Shares. Other principal shareholders of Affinia include The California State Teachers Retirement System, The Northwestern Mutual Life Insurance Company, Stockwell Fund, L.P. and the Applicant.
Affinia is not, and will not be, a reporting issuer under the securities legislation of any jurisdiction in Canada, and its shares are not and will not be listed and posted for trading on any stock exchange in Canada.
On May 13, 2005, 700,000 Common Shares were sold to the Applicant (previously known as the Ontario Municipal Employees Retirement Board) pursuant to the “accredited investor” exemption within the meaning of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106). On December 14, 2007, a new share certificate was issued to change the name of the owner of the 700,000 Common Shares from the Ontario Municipal Employees Retirement Board to the Applicant (the Initial Investment).
On October 31, 2008, 10,000 shares of 9.5% Class A Convertible Participating Preferred Stock (the Preferred Shares) were sold to the Applicant pursuant to the “accredited investor” exemption in NI 45-106.
The Applicant has the option of converting, in whole or in part, its Preferred Shares into a number of shares of common stock equal to the quotient of the original purchase price plus all accrued and unpaid dividends thereon and the conversion price in effect. The conversion ratio is subject to adjustment for stock splits, combinations and similar events.
The Applicant was previously granted 1,000 stock options in Affinia. Pursuant to an Information Memorandum dated August 25, 2010 from Affinia, the Applicant had the opportunity to exchange its options for restricted stock unit awards (RSUs). Each RSU represents the contingent right to receive one share of common stock.
On September 23, 2010, the Applicant voluntarily elected to have all of its eligible options cancelled and forfeited in exchange for 3,000 RSUs. The Applicant was granted the RSUs on October 18, 2010. For tax reasons, subsequent to the exchange, the RSUs were transferred to the Applicant’s Subsidiary, a wholly-owned subsidiary of the Applicant.
The RSUs qualify as a convertible or exchangeable security as such term is defined in NI 45-102.
While the exact number of Common Shares to be issued has not yet been determined, Affinia now proposes to conduct an initial public offering (IPO) of Common Shares, par value $0.01 per share.
As a result of the Applicant’s Initial Investment, the Applicant will own 700,000 Common Shares subsequent to the completion of the IPO.
Assuming completion of the IPO, Cypress expects to exit its investment in Affinia in the future through one or more public or private offerings of its common equity interests in Affinia. In the event that (i) Cypress and its affiliates realize a 2x return with respect to their disposition of more than 50% of their common equity interests in Affinia or (ii) the Common Shares trade at an average closing price of US $225 for 60 consecutive days, the RSUs will vest and become Common Shares.
Affinia has filed a Registration Statement on Form S-1 with the United States Securities and Exchange Commission (SEC), which includes a prospectus. The Form S-1 is publicly available on the SEC’s website.
Immediately following the IPO, Affinia intends to list the Common Shares on the New York Stock Exchange (the NYSE).
The Applicant intends to convert, in whole or in part, its Preferred Shares into Common Shares following the IPO. Assuming completion of the IPO, the Applicant, together with the Applicant’s Subsidiary and any affiliates, expect to hold approximately 12-15% of the Common Shares outstanding.
Pursuant to the terms of a lock-up agreement between the Applicant and the underwriters for the IPO (the Lock-Up Agreement), the Applicant will be subject to a 180-day contractual holding period during which it may not offer, pledge, announce the intention to sell, sell, contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares.
The Applicant is the sole Canadian shareholder of Affinia. As such, there is no broader market interest in Affinia in Canada.
Affinia is not a reporting issuer or its equivalent in the Province of Ontario or any other province or territory of Canada, nor are any of its securities listed or posted for trading on any exchange, or market, located in Canada. Affinia has no present intention of becoming listed in Canada or of becoming a reporting issuer under the Act or under any
other Canadian securities laws, and no market for the Common Shares exists in Canada and none is expected to develop.
The first trade of Common Shares of Affinia will be made through the facilities of the NYSE, a market located outside of Canada, and/or will be made to a person or company outside of Canada and, in either case, will not have any connection to the investing Canadian public.
Requiring that a prospectus be filed in Canada to permit the sale of the Common Shares outside of Canada would not provide any additional protection or material information to Canadian investors. Following the IPO, Affinia will be subject to the Securities Exchange Act of 1934 and the obligations under the rules of the NYSE. Canadian holders of the Common Shares will receive copies of all shareholder materials provided by Affinia to non-Canadian holders of the Common Shares.
In the absence of the exemption requested hereby, the first trade of Common Shares held by the Applicant and the Applicant’s Subsidiary will be deemed to be a distribution and subject to the prospectus requirement under section 53 of the Act.
The prospectus exemptions in sections 2.5 and 2.6 of NI 45-102 will not be applicable in this situation because Affinia is not a reporting issuer or its equivalent in the Province of Ontario or any other province or territory of Canada.
The prospectus exemption in section 2.14 of NI 45-102 would be applicable in this situation, but will not be available to the Applicant and the Applicant’s Subsidiary with respect to their first trade of Common Shares, whether they were acquired from the Initial Investment, the conversion of the Preferred Shares, or the vesting of the RSUs, because residents of Canada, including the Applicant and the Applicant’s Subsidiary will own more than 10% of the outstanding Common Shares.
AND UPON considering the Application and the recommendation of the staff of the Commission;
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED, pursuant to subsection 74(1) of the Act that the Exemption Sought is granted provided that at the date of the first trade of the Common Shares by the Applicant or the Applicant’s Subsidiary:
(a) Affinia is not a reporting issuer in any jurisdiction of Canada where that concept exists;
(b) the trade is executed through the facilities of the NYSE or any other exchange or market outside Canada or to a person or company outside of Canada; and
(c) at the distribution date of such shares, after giving effect to the issue of the shares and any other shares of the same class or series that were issued at the same time as or as part of the same distribution as the shares, residents of Canada (excluding, for the purposes of the calculation of both the numerator and denominator in the 10 percent threshold conditions outlined below, Common Shares acquired by the Applicant or the Applicant’s Subsidiary prior to the date of this Order and Common Shares acquired by the Applicant or the Applicant’s Subsidiary pursuant
to a conversion or exchange from convertible or exchangeable securities acquired by the Applicant or the Applicant’s Subsidiary prior to the date of this Order):
(i) did not own directly or indirectly more than 10 percent of the outstanding shares of the class or series, and
(ii) did not represent in number more than 10 percent of the total number of owners directly or indirectly of shares of the class or series.
Furthermore, the decision of the Commission is that the Confidential Material be kept confidential and not be made public until the earliest of: (a) the date on which Affinia consummates the IPO; (b) the date the Applicant advises the principal regulator in writing that there is no longer any need for the application and this Order to remain confidential; and (c) the date that is 90 days after the date of this Order.
DATED at Toronto this 11th day of March, 2011.
“Margot C. Howard” “James E.A. Turner”
Commissioner Vice Chair
Ontario Securities Commission Ontario Securities Commission