July 30, 2014
Partner John Emanoilidis comments in a Financial Post article on Augusta Resource Corporation’s recent case indicating Canadian securities regulators are still having a tough time with the poison pill takeover defence.
Below is an excerpt of the article.
One might have thought otherwise after the B.C. Securities Commission reached the Augusta decision in May. The regulator said it would let Augusta leave its plan in place for an unheard of 155 days in the face of an unwanted bid from HudBay announced in February. Yet the commission didn't provide its detailed reasons until June 24. Those make it clear the regulator was motivated only by the unique facts of the case, and not by a change in policy.
That means that it's hard to pin down whether regulators across the country have changed their tune on poison pills, lawyers say.
The fate of poison pills is important because there's a fair bit of MA underway in the mining sector, and it's not all friendly. This has boosted interest in the availability of the standard hostile takeover defence in Canada, the shareholder rights plan or poison pill.
In theory, a poison pill allows a company's board to flood the market with so many shares that a hostile bidder wouldn't be able to follow through on its offer. In practice, no Canadian company would ever use one because it would destroy the value of its existing shares. Their real value is buying the target company's board some time to find an alternative to the hostile offer.
"The commissions could clarify in a policy statement that we would expect that rights plans would not be terminated by the securities commissions earlier than X number of days in circumstances where there's been a vote," John Emanoilidis, co-head of the MA practice at Torys LLP in Toronto.
To read the full article, click here.