SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
RE: IN THE MATTER OF A PROPOSED PLAN OF ARRANGEMENT involving Gennum Corporation, Semtech Corporation and Semtech Canada, Inc.
BEFORE: D. M. Brown J.
COUNSEL:
S. Woods and R. Morris, for the Applicants
M. Kestenberg, for Semtech Corporation and Semtech Canada, Inc.
HEARD: March 15, 2012
REASONS FOR DECISION
I. Application to approve a plan of arrangement
[ 1 ] Gennum Corporation seeks a final order approving a plan of arrangement pursuant to section 182 of the Ontario Business Corporations Act .
II. The proposed plan of arrangement and the interests being arranged
[ 2 ] Gennum designs, develops and markets semiconductor products and intellectual property cores for advanced enterprise, video broadcast, data communications and consumer connectivity applications. Incorporated under the OBCA , Gennum’s shares are listed on the Toronto Stock Exchange. As at February 3, 2012, there were 35,560,199 shares outstanding (the “Gennum Shares”).
[ 3 ] The proposed plan of arrangement resulted from arm’s length negotiations between Gennum and Semtech Corporation, a supplier of semiconductors. Under the plan Semtech Canada, a wholly-owned subsidiary of Semtech, would acquire all of the outstanding Gennum Shares for cash consideration.
[ 4 ] As described in the affidavits of Dr. Franz Fink sworn February 7 and March 14, 2012, as well as in the detailed factum filed by Gennum, on January 23, 2012, Gennum, Semtech, and Semtech Canada entered into an Arrangement Agreement.
[ 5 ] On February 13, 2012, Morawetz J. granted an Interim Order for the process leading up to and including the holding of the special meeting of Gennum Shareholders on March 14, 2012 (the “Meeting”).
[ 6 ] That meeting was held. A quorum was present. Of the 35,560,199 issued and outstanding Gennum Shares, 196 Shareholders holding 25,200,879 Shares in person or by proxy were present. The Arrangement Resolution was approved by 99.5% of all of the votes cast by the Shareholders, and was approved by 99.5% of the Minority Shareholders. As set out in the Circular, the Arrangement Agreement provided for dissent rights. No Gennum Shareholder exercised dissent rights. No person appeared on the return of the application to oppose the Final Order sought.
III. Governing principles
[ 7 ] The principles to be considered by a court in deciding whether to approve a plan of arrangement were set out by the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders , 2008 SCC 69 , [2008] 3 S.C.R. 560 . In sum, to grant a final order approving an arrangement a court must be satisfied that:
(i) The proposal constitutes an “arrangement” within the meaning of the OBCA ;
(ii) The applicant has complied will all statutory and court-mandated requirements;
(iii) The application has been put forward in good faith; and,
(iv) The arrangement is fair and reasonable.
A. Is the proposed transaction an “arrangement”?
[ 8 ] The proposed transaction is an “arrangement” within the meaning of section 182(1)(f) of the OBCA and the applicant is a “corporation” within the meaning of that Act.
B. The statutory and court-ordered procedures
[ 9 ] The affidavit sworn by Dr. Fink on March 14, 2012, established that Gennum had satisfied the procedural requirements contained in the Interim Order. The evidence filed satisfies me that the Gennum has met and complied with the procedures for an arrangement imposed by the OBCA .
C. Analysis for fairness and reasonableness
C.1 Was the application put forward in good faith?
[ 10 ] Gennum has demonstrated that it is putting the application forward in good faith. The evidence filed by Gennum described how the company responded to some unsolicited offers to purchase received during the latter part of 2011: the Board struck a Special Committee to consider strategic options; the Special Committee retained a financial advisor, Canaccord Genuity; offers were solicited from a number of interested parties; the Special Committee, with the assistance of its financial and legal advisors, considered the offers and pursued negotiations with two bidders, ultimately recommending the Sentech offer; the consideration for the Sentech offer represented a 120% premium over the closing price on the last trading day; and the Board approved the Sentech offer. As well, Canaccord Genuity provided the Board with a favourable fairness opinion.
[ 11 ] In paragraphs 34 and 35 of his February 7, 2012 affidavit Dr. Fink reviewed in detail the factors considered by the Special Committee and the Board in deciding to recommend the plan of arrangement. Those factors indicate that the Board gave extensive thought to the strategic options available to the company, as well as the benefits and alternatives available to the company and its Shareholders.
C.2 Does the arrangement have a valid business purpose?
[ 12 ] For similar reasons the Arrangement has a valid business purpose.
C.3 Are the objections of those whose legal rights are being arranged under the arrangement being resolved in a fair and balanced way?
[ 13 ] The Board unanimously determined that the Arrangement was in the best interests of Gennum and its Shareholders. The Board sent to all Shareholders and affected option holders a detailed Circular explaining the purpose of the Arrangement and describing the Arrangement. The Circular explained that the Arrangement Agreement made provision for dissent rights, and the Circular described how a Shareholder could exercise dissent rights. The Meeting Materials also included a copy of the Notice of Application in this proceeding.
[ 14 ] As noted above, at the special meeting yesterday Shareholders overwhelmingly voted in favour of the Arrangement resolution, including support by a majority of the minority. No Shareholder exercised dissent rights, and no person has appeared to oppose this application.
[ 15 ] Taken together, all this evidence supports a finding that the Arrangement is fair and reasonable.
IV. Conclusion and orders
[ 16 ] For these reasons, I approve the Arrangement, and I have signed the draft Final Order filed by Gennum.
D. M. Brown J.
Date : March 15, 2012