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Takeover Materials

If your company is involved in a takeover bid or issuer bid, you will receive two documents called circulars: a takeover bid circular, describing the bid in detail, and a directors’ circular, setting out whether the directors recommend that you accept or reject the bid. You may also want to use SEDAR to see if anyone has filed an early warning report.

What do You Need to do?

If you receive a takeover bid circular, you need to decide whether to sell your shares to the person making the offer.

You normally have a little over three months to make your decision. In some cases, that period of time may be shortened so you may want to monitor the company’s news releases. You may also want to wait to see what the directors recommend to shareholders or until the end of the period to see if a competing bid appears. You may further want to wait to see if the original bidder increases the price or changes the bid terms.

Often the price of the company’s shares will go up while a takeover bid is underway and you can choose to sell your shares into the market.

There will often be several news releases from the bidder and the company. You may want to keep track of these fillings on SEDAR and monitor business news.

What Happens if You Decide to Sell?

If you decide to sell your shares to the bidder, you will receive cash or the bidder’s shares (or a combination of both) after the bid expires.

Under the law, bids are subject to the conditions that the bidder acquires at least 50% of the shares. This means that even if you decide to sell, the bidder may not actually take your shares if this minimum tender condition is not met. Bids may also be subject to other conditions – you should read the takeover bid circular carefully.

If you decide not to sell your shares, you will continue to hold shares of the original company.

If the person making a takeover bid acquires at least 90% of the shares of the company, they can force you and other remaining shareholders to sell your shares at the same price as offered under the bid.

If the bidder acquires more than two-thirds but less than 90% of the company shares, they may call a “special” meeting of shareholders to vote on a merger between the company and the bidder. If you do not vote in favour of the merger, the bidder will offer you the same price per share that was offered under the bid. Read the information circular in relation to the special meeting carefully to understand your rights.

If the person making the bid acquires more than 50% but does not acquire your shares, that person will have control of the company and can make changes, including appointing their own nominees as directors.

What You Should Focus On

There are two types of takeover bids: cash bids and share-exchange bids (some offers are a mix of cash and shares.)

Cash Bid

The bidder offers to buy your shares for cash. You will need to consider whether you want the money now or want to remain a shareholder. You should also consider how the offer price compares to the market price, and whether you’re comfortable with the person making the offer. The takeover bid circular should contain information regarding the historical price of the company’s shares.

Share-Exchange Bid

The person or company offering to buy your shares will pay you with shares in another company. If the bid is successful and you sell your shares, you’ll end up holding shares in the other company.

Whenever you receive shares of another company in payment, you need to focus on whether you want to invest in that company. Read the takeover bid circular carefully and assess the following factors:

  • The directors and management team.
  • The risks associated with investing in that company.
  • The financial position of that company.
  • Whether it pays dividends, interest, or other distributions.
  • Where the company is listed (e.g. which stock exchange) and its trading history.

If the new company is already public, go to SEDAR and review the company’s documents.

If You Need Help, Consider These Options

  • Ask your investment advisor to discuss your questions with you.
  • Ask another trusted professional (for example, your lawyer or accountant) to discuss your questions with you.
  • Call the company and ask for a further explanation.