March 24, 2017
The Yukon Supreme Court’s recent decision related to Exxon Mobil’s purchase of InterOil has called attention to the role of fairness opinions in M&A. Our recent bulletin provides insight on the Yukon Supreme Court’s ruling, including the spotlight that the ruling has put on financial advisers, the level of disclosure in the fairness opinions they provide, and the compensation they are paid (including success fees). Partner and co-head of Torys’ M&A Practice John Emanoilidis was asked by Lexpert to weigh in on these issues and what market players may expect in Canada as a result of the Court’s decision. Below is an excerpt of the article.
For his part, Emanoilidis does not believe that InterOil will deter parties from using the plan of arrangement process to implement a friendly public M&A.
“Arrangements are a particularly advantageous structure where the transaction may be contentious since the court approval process helps the target control opposition and the litigation process,” he says.
Where InterOil will come into play is where proposed arrangements are stirring up shareholder opposition. In such cases, Emanoilidis says, the target should carefully consider whether the circumstances warrant an opinion from an independent adviser who is not entitled to a success fee.
“Target boards may also need to submit more elaborate evidence in court on the fairness of the proposed transaction in order to address potential opposition to the deal,” the lawyer adds. “Post InterOil, market practice in proxy circulars may shift to enhanced disclosure which highlights information that has been provided by financial advisers or conclusions reached by the board based on financial advice — a shift that would be consistent with the approach in the United States.”
This said, Emanoilidis believes that Canadian boards should, where appropriate, still be able to rely on a fairness opinion that includes a success fee without having to seek a second opinion.
‘The Ontario Securities Commission is considering additional guidance on the disclosure issue,” he says. “Until then, we don’t expect significant change in market practice in most cases.”
To read the full article, click here.