In the Matter of
the Securities Legislation of
Ontario
(the Jurisdiction)
and
In the Matter of
the Process for Exemptive Relief Applications
in Multiple Jurisdictions
and
In the Matter of
General Electric Company
(the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that:
(a) the prospectus requirement in section 53 of the Securities Act (Ontario) (the Act) shall not apply in connection with the proposed distribution (the Spin-Off) by the Filer of shares of common stock (SpinCo Shares) of a wholly-owned subsidiary, GE Healthcare Holding LLC (SpinCo) to holders (Filer Shareholders) of shares of common stock of the Filer (Filer Shares) resident in Canada (Filer Canadian Shareholders); and
(b) the prospectus requirement in section 53 of the Act and the dealer registration requirement in section 25 of the Act shall not apply in connection with the proposed distributions by SpinCo of SpinCo Awards (as defined below) (and, upon the exercise or conversion of SpinCo Awards, SpinCo Shares) to certain holders of Filer Awards (as defined below) resident in Canada (Filer Canadian Employees) who will not become employees of SpinCo or any of its subsidiaries (SpinCo Canadian Employees) after the Spin-Off,
(collectively, the Requested Relief).
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 each of the other provinces and territories of Canada.
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 is a corporation incorporated in the State of New York with principal executive offices in Boston, Massachusetts. The Filer is a high-tech industrial company that operates worldwide through its four segments: aviation, healthcare, renewable energy, and power.
2. The Filer is not a reporting issuer and, currently, has no intention of becoming a reporting issuer under the securities laws of any province or territory of Canada.
3. The authorized capital of the Filer consists of shares of common stock and shares of preferred stock, of which there were 1,092,668,140 shares of common stock and 5,835,763 shares of preferred stock issued and outstanding as at September 30, 2022.
4. Filer Shares are listed on the New York Stock Exchange (the NYSE) and trade under the symbol “GE”. The Filer also has (i) 1.250% Notes due 2023, (ii) 0.875% Notes due 2025, (iii) 1.875% Notes due 2027, (iv) 1.500% Notes due 2029, (v) 7.500% Guaranteed Subordinated Notes due 2035 and (vi) 2.125% Notes due 2037 listed on the NYSE and which trade under the symbols “GE 23E”, “GE 25”, “GE 27E”, “GE 29”, “GE /35”, “GE 37”, respectively. No securities of the Filer are listed or posted for trading on any stock exchange or other regulated market in Canada. The Filer has no present intention of listing its securities on any Canadian stock exchange.
5. The Filer is subject to the United States Securities Exchange Act of 1934, as amended (the 1934 Act) and the rules, regulations and orders promulgated thereunder.
6. Based on a geographic report prepared for the Filer by Broadridge Financial Solutions, as of September 30, 2022, there were 1,348 registered Filer Canadian Shareholders holding approximately 112,715 Filer Shares, representing holdings of approximately 0.01% of the outstanding Filer Shares (calculated on the basis of 1,092,668,140 Filer Shares issued and outstanding as at September 30, 2022, as indicated in the Filer’s quarterly report on Form 10-Q dated October 25, 2022). The Filer does not expect these numbers to have materially changed since the dates mentioned above.
7. Based on a geographic survey of beneficial shareholders prepared for the Filer by Broadridge Financial Solutions, as of August 8, 2022, there were 67,678 beneficial Filer Canadian Shareholders, representing approximately 2.68% of the beneficial Filer Shareholders worldwide (calculated on the basis of 2,530,309 beneficial Filer Shareholders worldwide as at May 4, 2022, as indicated in reports prepared for the Filer in connection with its annual shareholder meeting), holding approximately 25,231,511 Filer Shares, representing approximately 2.31% of the outstanding Filer Shares (calculated on the basis of 1,092,668,140 Filer Shares issued and outstanding as at September 30, 2022, as indicated in the Filer’s quarterly report on Form 10-Q dated October 25, 2022). The Filer does not expect these numbers to have materially changed since the dates mentioned above.
8. Based on the information above, the number of registered and beneficial Filer Canadian Shareholders and the proportion of Filer Shares held by such shareholders are de minimis.
9. SpinCo is currently a limited liability company formed under Delaware law, with principal executive offices in Chicago, Illinois. It is currently a wholly-owned subsidiary of the Filer that, at the time of the Spin-Off, will hold the Filer’s healthcare business (GE Healthcare) (the SpinCo Business). Prior to the Spin-Off, SpinCo will be converted into a corporation under Delaware law. Following the Spin-Off, SpinCo’s executive offices will remain in Chicago, Illinois.
10. Immediately following the Spin-Off, SpinCo’s authorized capital stock will consist of shares of common stock, par value US$0.01 and shares of preferred stock, par value US$0.01.
11. The Spin-Off is part of a broader initiative of the Filer pursuant to which the Filer intends to form three public companies focused on the growth sectors of aviation, healthcare and energy. The Filer intends to implement this initiative by (i) first pursuing a tax-free spin-off of the SpinCo Business in early 2023 via the Spin-Off, in which the Filer expects to retain a stake of up to 19.9%, (ii) combining its renewable energy (GE Renewable Energy), power (GE Power), and digital (GE Digital) businesses into one business (GE Vernova) and then pursuing a tax-free spin‑off of the combined business in early 2024, and (iii) following the consummation of the transactions in (i) and (ii), focusing itself on its remaining aviation business (GE Aerospace). The second spin-off of the GE Vernova business is separate from, and not conditioned on, the Spin‑Off.
12. As part of the first step of the above-mentioned initiative, the Filer is proposing to spin off its SpinCo Business into an independent company, SpinCo, through a series of transactions. These transactions are expected to result in the Spin‑Off by the Filer, pro rata to the Filer Shareholders by way of a dividend in specie, of at least 80.1% of the outstanding SpinCo Shares (prior to the completion of the Spin-Off, the Filer may adjust the percentage of SpinCo Shares to be distributed to Filer Shareholders and retained by the Filer in response to market and other factors, and will amend its Registration Statement (as defined below) to reflect any such adjustment). Each Filer Shareholder will receive a number of SpinCo Shares to be determined prior to the Spin-Off for each Filer Share. Holders of shares of preferred stock of the Filer will not be entitled to receive any SpinCo Shares as part of the Spin-Off or otherwise participate therein.
13. Fractional SpinCo Shares will not be distributed in connection with the Spin-Off. The distribution agent will aggregate the amount of fractional shares that would otherwise have been distributed into whole shares, sell such whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of brokerage fees, transfer taxes and other costs) pro rata to each Filer Shareholder who would otherwise have been entitled to receive fractional shares (net of any applicable withholding taxes). Recipients of cash in lieu of fractional SpinCo Shares, if any, will not be entitled to any interest on the amounts of payment made in lieu of fractional shares. The distribution agent will, in its sole discretion, without any influence by the Filer or SpinCo, determine when, how, through which broker-dealer, and at what price to sell the whole shares. The distribution agent is not, and any broker-dealer used by the distribution agent will not be, an affiliate of either the Filer or SpinCo.
14. Filer Shareholders will not be required to pay any consideration for the SpinCo Shares, or to surrender or exchange Filer Shares or take any other action to receive their SpinCo Shares. The Spin-Off will occur automatically and without any investment decision on the part of Filer Shareholders.
15. Subject to the satisfaction of certain conditions, it is currently anticipated that the Spin-Off will become effective on or about the first week of January 2023.
16. Following the Spin-Off, SpinCo will cease to be a subsidiary of the Filer.
17. SpinCo has applied to have the SpinCo Shares listed on NASDAQ under the symbol “GEHC” before the Spin-Off. Subject to, among other things, satisfaction of NASDAQ’s original listing conditions, it is expected that NASDAQ will conditionally approve the listing of SpinCo Shares on NASDAQ in December of 2022.
18. After the completion of the Spin-Off, the Filer Shares will continue to be listed and traded on the NYSE.
19. SpinCo is not a reporting issuer in any province or territory in Canada nor are its securities listed on any stock exchange in Canada. SpinCo has no present intention to become a reporting issuer in any province or territory of Canada or to list its securities on any stock exchange in Canada after the completion of the Spin-Off.
20. The Spin-Off will be effected under the laws of the State of New York.
21. Because the Spin-Off will be effected by way of a dividend of SpinCo Shares to Filer Shareholders, no shareholder approval of the proposed transaction is required (or being sought) under New York law.
22. In connection with the Spin-Off, on October 11, 2022, SpinCo filed with the United States Securities and Exchange Commission (the SEC) a registration statement on Form 10 under the 1934 Act, detailing the proposed Spin-Off, and subsequently filed amendments thereto on November 7, 2022, November 18, 2022 and December 2, 2022 (the Registration Statement).
23. After the SEC has completed its review of the Registration Statement, Filer Shareholders will receive a copy of an information statement (the Information Statement) detailing the terms and conditions of the Spin-Off and forming part of the Registration Statement. All materials relating to the Spin-Off sent or made available by or on behalf of the Filer and SpinCo in the United States (including the Information Statement) will be sent or made available concurrently to Filer Canadian Shareholders.
24. The Information Statement will contain “prospectus-level” disclosure about SpinCo within the meaning of Canadian securities legislation and market practices (it being understood that such “prospectus-level” disclosure will be prepared in accordance with the form requirements of the SEC).
25. Filer Canadian Shareholders who receive SpinCo Shares pursuant to the Spin-Off will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Spin-Off that are available to Filer Shareholders resident in the United States.
26. Following the completion of the Spin-Off, SpinCo will be subject to the requirements of the 1934 Act and, subject to being listed for trading on the NASDAQ, its rules and regulations. SpinCo will send concurrently to holders of SpinCo Shares resident in Canada the same disclosure materials required to be sent under applicable United States securities laws to holders of SpinCo Shares resident in the United States.
27. The Spin-Off to Filer Canadian Shareholders would be exempt from the prospectus requirement pursuant to subsection 2.31(2) of National Instrument 45-106 Prospectus Exemptions (NI 45-106) but for the fact that SpinCo is not a reporting issuer under the securities legislation of any jurisdiction in Canada.
28. After the Spin-Off, employees of the Filer or its subsidiaries in Canada will either (i) remain Filer Canadian Employees or (ii) become SpinCo Canadian Employees.
29. The Filer has previously granted equity-based compensation awards to its employees comprised of stock options (Filer Options) and restricted stock units (including performance stock units) (Filer RSUs and, together with the Filer Options, the Filer Awards) exercisable for, or convertible into, Filer Shares under its various equity incentive plans (Filer’s Plans).
30. As of August 4, 2022, there were 103 Canadian holders of Filer Options who held approximately 0.58% of the outstanding Filer Options granted. Therefore, there are a de minimis number of Canadian holders of Filer Options.
31. As of August 4, 2022, there were 136 Canadian holders of Filer RSUs who held approximately 2.46% of the outstanding Filer RSUs granted. Therefore, there are a de minimis number of Canadian holders of Filer RSUs.
32. As a result of the Spin-Off, the value of the Filer Shares will decrease. Accordingly, the Filer Awards will be equitably adjusted after the Spin-Off according to formulae intended to preserve the intrinsic value of the Filer Awards as measured immediately before and immediately after the Spin-Off (including, as applicable, adjustments to exercise prices and number of shares subject to awards), subject to rounding. Such adjustments will be effected in compliance with the terms of the Filer Awards.
33. The adjustments include:
(a) With respect to Filer Options:
i. in the event that the holder thereof does not become an employee of SpinCo or its subsidiaries, the number and/or exercise price of Filer Options held by such holder will be adjusted so as to account for the impact of the Spin-Off on the aggregate intrinsic value of such Filer Options;
ii. in the event that the holder thereof becomes an employee of SpinCo or its subsidiaries, the Filer Options held by such holder will be adjusted or converted into options to purchase SpinCo Shares, in such amounts and with such exercise prices as are necessary to account for the impact of the Spin‑Off on the aggregate intrinsic value of such Filer Options; and
(b) With respect to Filer RSUs held by holders other than Filer Corporate Employees (as defined below):
i. in the event that such holder does not become an employee of SpinCo or its subsidiaries, the number of Filer RSUs held by such holder will be adjusted so as to account for the impact of the Spin-Off on the aggregate intrinsic value of such Filer RSUs;
ii. in the event that such holder becomes an employee of SpinCo or its subsidiaries, the Filer RSUs held by such holder will be adjusted or converted into restricted stock units (including performance stock units) convertible into SpinCo Shares, in such amounts as are necessary to account for the impact of the Spin‑Off on the aggregate intrinsic value of such Filer RSUs; and
(c) With respect to Filer RSUs held by holders employed in the Filer’s corporate division (Filer Corporate Employees), regardless of whether the holder thereof remains an employee of the Filer or its subsidiaries or becomes an employee of SpinCo or its subsidiaries after the time of the Spin-Off, each Filer RSU will be adjusted into a combination of restricted stock units convertible into Filer Shares and restricted stock units convertible into SpinCo Shares.
34. As a result of the adjustments to the Filer Awards, such Filer Canadian Employees which are Filer Corporate Employees (Filer Canadian Corporate Employees) may hold (i) adjusted equity‑based awards exercisable for, or convertible into, Filer Shares (Adjusted Filer Awards) and (ii) adjusted equity-based awards convertible into, SpinCo Shares (SpinCo Awards).
35. The Filer and SpinCo will prepare the adjustment materials in respect of the Adjusted Filer Awards and the SpinCo Awards, and the current plan administrator for the Filer’s Plans will administer the distributions of the Adjusted Filer Awards and the SpinCo Awards.
36. In connection with the adjustment to Filer Awards, each Filer Canadian Corporate Employee will receive the same disclosure material that each United States employee of the Filer or SpinCo or their respective subsidiaries would receive who holds the Filer Awards (subject to adaptations intended to take into account applicable local matters).
37. It is intended that Filer Canadian Corporate Employees holding Filer Awards will benefit from the Requested Relief under this Application in respect of the SpinCo Awards as a one-time event. After the Spin-Off, in respect of the grant of new awards, Filer Canadian Employees will receive awards exercisable for, or convertible into, Filer Shares and SpinCo Canadian Employees will receive awards exercisable for, or convertible into, SpinCo Shares, as the case may be.
38. The distribution, after the Spin-off, of SpinCo Awards (and, upon conversion of SpinCo Awards, SpinCo Shares) to Filer Canadian Corporate Employees, insofar as it would constitute a distribution of securities subject to the prospectus requirement and the dealer registration requirement under applicable Canadian securities legislation, would be exempt from the prospectus requirements pursuant to section 2.24 of NI 45-106 and exempt from the dealer registration requirement pursuant to section 8.16 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations but for the fact that such distribution will occur after the Spin-Off at a time when the Filer and SpinCo will not be related entities for the purposes of this exemption.
39. There will be no active trading market for the SpinCo Shares in Canada following the Spin-Off and none is expected to develop. Consequently, it is expected that any resale of SpinCo Shares distributed in connection with the Spin-Off will occur through the facilities of the NASDAQ or any other exchange or market outside of Canada on which the SpinCo Shares may be quoted or listed at the time that the trade occurs or to a person or company outside of Canada.
40. Neither the Filer nor SpinCo is in default of any securities legislation in any jurisdiction of Canada.
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 Requested Relief is granted provided that the first trade in:
(a) SpinCo Shares acquired pursuant to the Spin-Off in reliance on this decision; and
(b) SpinCo Shares issued to Filer Canadian Corporate Employees on the exercise or conversion of SpinCo Awards in reliance on this decision;
will be deemed to be a distribution that is subject to section 2.6 of National Instrument 45-102 Resale of Securities.
DATED at Toronto this 13th day of December, 2022.
“Erin O’Donovan” ”
Erin O’Donovan
Manager, Corporate Finance Branch
Ontario Securities Commission