1700480 Ontario Inc. and the Macerich Company
Headnote
Subsection 74(1) – Application for exemption from prospectus requirement in connection with first trade of shares of issuer through exchange or market outside of Canada or to person or company outside of Canada – issuer not a reporting issuer in any jurisdiction in Canada – conditions of the exemption in section 2.14 of National Instrument 45-102 Resale of Securities not satisfied as residents of Canada own more than 10% of the total number of shares – relief granted subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).
National Instrument 45-102 Resale of Securities, s. 2.14.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
(the Act)
AND
IN THE MATTER OF
1700480 ONTARIO INC. AND THE MACERICH COMPANY
ORDER
Background
The Ontario Securities Commission (the Commission) has received an application from 1700480 Ontario Inc. (the Applicant) for an order pursuant to subsection 74(1) of the Act for an exemption from the prospectus requirement contained in section 53 of the Act in connection with the first trades of the Subject Shares (as defined below) issued to the Applicant (the Requested Relief).
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This order is based on the following facts represented by the Applicant and The Macerich Company (Macerich):
1. The Applicant is a direct, wholly-owned subsidiary of the Ontario Teachers' Pension Plan Board (OTPPB) and was formed under the laws of the Province of Ontario. The Applicant's head office is located at 20 Queen Street West, Suite 500, Toronto, Ontario M5H 3R4.
2. The Applicant is not a reporting issuer in any province or territory of Canada and is not an “offering corporation” under the Business Corporations Act (Ontario). The Applicant's securities are not listed or quoted on any exchange or market in Canada or outside of Canada.
3. OTPPB is an independent corporation established on December 31, 1989 by the Teachers' Pension Act (Ontario) to administer and manage a pension plan established for the benefit of the Province of Ontario's primary and secondary school teachers and to pay members of the pension plan their respective benefits under the plan. OTPPB's head office is located at 5650 Yonge Street, Toronto, Ontario M2M 4H5.
4. Macerich was formed under the laws of the State of Maryland in September 1993 and is a self-administered and self-managed real estate investment trust involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community/power shopping centers located throughout the United States. Macerich's principal executive office is located at 401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401.
5. Macerich's authorized share capital consists of an aggregate of 325,000,000 shares of capital stock, US$0.01 par value per share, currently consisting of 250,000,000 shares of common stock (the Common Shares), 15,000,000 shares of preferred stock and 60,000,000 shares of excess stock, of which 157,971,594 Common Shares were outstanding as at the close of business on December 11, 2014. Computershare Trust Company, N.A. (Computershare) is the transfer agent and registrar for the Common Shares.
6. The Common Shares are listed and posted for trading on the New York Stock Exchange (the NYSE) under the symbol “MAC”. Other than the foregoing listing on the NYSE, none of Macerich's securities are listed or posted for trading on any exchange or market in Canada or outside of Canada.
7. Macerich is a registrant with the United States Securities and Exchange Commission (the SEC) and is subject to the requirements of the United States Securities Exchange Act of 1934, as amended (the 1934 Act), and the rules and regulations of the NYSE. To the best of Macerich's knowledge, it is not in default of any of the requirements of the NYSE or the applicable securities laws of the United States or any jurisdiction of Canada.
8. Macerich is not a reporting issuer or its equivalent in any province or territory of Canada and has no present intention of becoming a reporting issuer in any province or territory of Canada or of becoming listed in Canada, and no market for the Common Shares exists in Canada and none is expected to develop.
9. Pursuant to a Master Agreement dated November 14, 2014 between the Applicant, Pacific Premier Retail LP (PPRLP), Queens JV LP (the Queens JV), Macerich and certain subsidiaries of Macerich (the Agreement), Macerich agreed to issue 17,140,845 Common Shares (the Subject Shares) to the Applicant as part of the consideration for the acquisition by certain Macerich subsidiaries of the entire equity interests of the Applicant in PPRLP and the Queens JV (the Transaction).
10. The Subject Shares were issued to the Applicant, and the Transaction closed, on November 14, 2014 (the Distribution Date). The Subject Shares were issued to the Applicant on a private placement basis in reliance on the accredited investor exemption from the prospectus requirement under section 2.3 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106). The Subject Shares have been listed on the NYSE.
11. Pursuant to a Registration Rights Agreement dated November 14, 2014 between Macerich and the Applicant, Macerich agreed to file with the SEC no later than December 15, 2014 a registration statement under Rule 415 of the United States Securities Act of 1933, as amended (the U.S. Securities Act), or a prospectus under Rule 424(b) of the U.S. Securities Act registering the resale of the Subject Shares by the Applicant in the United States. On December 12, 2014, Macerich filed a prospectus supplement under Rule 424(b)(7) of the U.S. Securities Act registering the resale of the Subject Shares.
12. On the Distribution Date, after giving effect to the issuance of the Subject Shares pursuant to the Transaction, the Applicant and OTPPB (i) owned directly or indirectly 17,168,527 Common Shares, representing approximately 10.9% of the outstanding Common Shares, and (ii) represented in number less than 0.01% of the total number of owners directly or indirectly of the outstanding Common Shares. For greater certainty, the 27,682 Common Shares owned directly by OTPPB will not be subject to the Requested Relief.
13. Macerich has received through its advisor, Innisfree (M&A) Incorporated, a report prepared as at December 8, 2014 (the Reference Date) by Broadridge Financial Solutions, Inc. (Broadridge), who acts as an agent for broker-dealer firms with respect to the mailing of Macerich's proxy statements, setting out a list of beneficial holders of Common Shares with a Canadian address according to Broadridge's records (the Canadian Beneficial Ownership Report). The Reference Date is the date nearest to the Distribution Date for which Macerich was able to obtain complete information regarding the holdings and jurisdictions of residence of beneficial holders of Common Shares (the Canadian Beneficial Shareholder Information).
14. The Canadian Beneficial Ownership Report was prepared in respect of 147,647,032 beneficially owned Common Shares (the Report Shares), being 10,324,562 Common Shares (the Non-Included Shares) less than the 157,971,594 total Common Shares outstanding as at the Reference Date. The Canadian Beneficial Ownership Report identifies 22,323 total owners directly or indirectly of the Report Shares (the Total Reported Shareholders). According to the information contained in the Canadian Beneficial Ownership Report, as at the Reference Date, residents of Canada other than the Applicant and OTPPB (i) owned directly or indirectly 5,995,324 Common Shares, representing approximately 4.06% of the Report Shares, and (ii) represented in number 125 owners directly or indirectly of Common Shares, representing approximately 0.56% of the Total Reported Shareholders. The Canadian Beneficial Ownership Report is the only source of Canadian Beneficial Shareholder Information available to Macerich.
15. For illustration purposes only, assuming that 90% of the Non-Included Shares were held by residents of Canada as at the Reference Date, residents of Canada other than the Applicant and OTPPB would have held directly or indirectly approximately 9.68% of the total outstanding Common Shares as at the Reference Date (based on the information in the Canadian Beneficial Ownership Report).
16. Based solely on the information contained in the Canadian Beneficial Ownership Report, each Canadian resident identified in the Canadian Beneficial Ownership Report owned directly or indirectly an average of 47,962 Common Shares as at the Reference Date. Assuming that all of the Non-Included Shares (10,324,562) were owned directly or indirectly by Canadian residents and each such Canadian resident owned directly or indirectly an average of 47,962 Common Shares, a reasonable inference can be drawn (for illustration purposes only) that not more than an additional 215 Canadian residents owned directly or indirectly Common Shares, for a maximum total of 340 Canadian resident shareholders (the Estimated Maximum Number of Canadian Holders) as at the Reference Date. The Estimated Maximum Number of Canadian Holders represents approximately 1.52% of the Total Reported Shareholders.
17. Neither the Applicant nor OTPPB (i) has acquired any additional Common Shares since the Distribution Date, or (ii) holds any derivatives in respect of the Common Shares.
18. Macerich did not issue any Common Shares between the Distribution Date and the Reference Date, other than: the Subject Shares issued to the Applicant, 31,171 Common Shares issued upon the exercise of employee stock appreciation rights, 44,714 Common Shares issued upon redemption of units of limited partnership interests of Macerich subsidiaries and 11,050 Common Shares issued in connection with Macerich's employee stock purchase plan.
19. Other than the Schedule 13D filed by the Applicant and OTPPB with the SEC under the 1934 Act on November 24, 2014 in connection with the Transaction, no publicly available SEC filings have been made by any security holder of Macerich resident in Canada disclosing a change in beneficial ownership of Common Shares between the Distribution Date and the Reference Date.
20. To the best of Macerich's knowledge based on the facts contained in paragraphs 13 to 19 herein, as at the Distribution Date, after giving effect to the issuance of the Subject Shares, residents of Canada other than the Applicant and OTPPB (i) owned directly or indirectly less than 10% of the outstanding Common Shares, and (ii) represented in number less than 10% of the total number of owners directly or indirectly of the outstanding Common Shares.
21. In the absence of the Requested Relief, the Applicant takes the view that the first trade of Subject Shares held by the Applicant will be deemed to be a distribution and subject to section 53 of the Act.
22. The prospectus exemptions in sections 2.5 and 2.6 of National Instrument 45-102 Resale of Securities (NI 45-102) will not be applicable in this situation because Macerich is not a reporting issuer or its equivalent in the Province of Ontario or any other province or territory of Canada.
23. The prospectus exemption in subsection 2.14(1) of NI 45-102 would be applicable in this situation, but will not be available to the Applicant with respect to its first trade of Subject Shares because residents of Canada, including the Applicant, owned more than 10% of the outstanding Common Shares at the Distribution Date.
Decision
The Commission is satisfied that the granting of this order would not be prejudicial to the public interest within the meaning of subsection 74(1) of the Act.
The order of the Commission under subsection 74(1) of the Act is that the Requested Relief is granted, provided that:
(a) Macerich:
(i) was not a reporting issuer in any jurisdiction of Canada at the Distribution Date; or
(ii) is not a reporting issuer in any jurisdiction of Canada at the date of the trade;
(b) the trade is executed through the facilities of the NYSE or through any other exchange or market outside of Canada or to a person or company outside of Canada; and
(c) at the Distribution Date, after giving effect to the issue of the Subject Shares and any other shares of the same class or series that were issued at the same time or as part of the same distribution as the Subject Shares, residents of Canada (excluding the Applicant):
(i) did not own directly or indirectly more than 10% of the outstanding Common Shares; and
(ii) did not represent in number more than 10% of the total number of owners directly or indirectly of Common Shares.
DATED at Toronto this 23rd day of December, 2014.
“James Turner”
Vice-Chair
Ontario Securities Commission
“Judith N. Robertson”
Commissioner
Ontario Securities Commission