Brookfield Asset Management Inc. – s. 6.1 of NI 62-104 Take-Over Bids and Issuer Bids
Headnote
Section 6.1 of NI 62-104 -- Issuer bid -- relief from the requirements applicable to issuer bids in Part 2 of NI 62-104 -- Issuer proposes to purchase, at a discounted purchase price, up to 2,000,000 of its Class A shares from one of its shareholders -- due to the discounted purchase price, proposed purchases cannot be made through the TSX trading system -- but for the fact that the proposed purchases cannot be made through the TSX trading system, the Issuer could otherwise acquire the subject shares in accordance with the TSX rules governing normal course issuer bids, in reliance on the issuer bid exemption in subsection 4.8(2) of NI 62-104 -- the selling shareholder did not purchase the subject shares in anticipation or contemplation of resale to the Issuer and no Class A shares have been purchased by the selling shareholder for a minimum of 30 days prior to the date of the application seeking the requested relief in anticipation or contemplation of a sale of Class A shares by the selling shareholder to the Issuer -- no adverse economic impact on, or prejudice to, the Issuer or other security holders -- proposed purchases exempt from the requirements applicable to issuer bids in Part 2 of NI 62-104, subject to conditions, including that the Issuer not purchase, in the aggregate, more than one-third of the maximum number of shares to be purchased under its normal course issuer bid by way of off-exchange block purchases, and that the Issuer not make any proposed purchase unless it has first obtained written confirmation from the selling shareholder that, between the date of the order and the date on which the proposed purchase is completed, the selling shareholder has not purchased, had purchased on its behalf, or otherwise accumulated, any Class A shares of the Issuer to re-establish its holdings of Class A shares which will have been reduced as a result of the sale of the subject shares pursuant to the proposed purchases.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.
IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED AND IN THE MATTER OF BROOKFIELD ASSET MANAGEMENT INC.
ORDER (Section 6.1 of National Instrument 62-104)
UPON the application (the "Application") of Brookfield Asset Management Inc. (the "Issuer") to the Ontario Securities Commission (the "Commission") for an order pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids ("NI 62-104") exempting the Issuer from the requirements applicable to issuer bids in Part 2 of NI 62-104 (the "Issuer Bid Requirements") in respect of the proposed purchases by the Issuer of up to an aggregate of 2,000,000 of its Class A Limited Voting Shares (collectively, the "Subject Shares") in one or more tranches from BMO Nesbitt Burns Inc. (the "Selling Shareholder");
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Issuer (and the Selling Shareholder in respect of paragraphs 5, 6, 7, 8, 9, 10, 14, 25 and 26 as they relate to the Selling Shareholder) having represented to the Commission that:
1. The Issuer is a corporation governed by the Business Corporations Act (Ontario).
2. The registered and head office of the Issuer is located at 181 Bay Street, Suite 300, Toronto, Ontario, Canada M4J 2T3.
3. The Issuer is a reporting issuer in each of the provinces and territories of Canada and the Class A Limited Voting Shares of the Issuer (the "Class A Shares") are listed for trading on the New York Stock Exchange, the Toronto Stock Exchange (the "TSX") and the Euronext stock exchange under the symbols "BAM", "BAM.A" and "BAMA", respectively. The Issuer is not in default of any requirement of the securities legislation in the jurisdictions in which it is a reporting issuer.
4. The authorized share capital of the Issuer consists of an unlimited number of Class A Shares, an unlimited number of Class B Limited Voting Shares, an unlimited number of Class A preferred shares issuable in series and an unlimited number of Class AA preferred shares issuable in series. As of January 31, 2017: (a) 986,367,192 Class A Shares; (b) 85,120 Class B Limited Voting Shares; (c) 10,465,100 Class A preferred shares series 2; (d) 4,000,000 Class A preferred shares series 4; (e) no Class A preferred shares series 7; (f) 2,479,585 Class A preferred shares series 8; (g) 5,519,115 Class A preferred shares series 9; (h) no Class A preferred shares series 12; (i) 9,647,700 Class A preferred shares series 13; (j) no Class A preferred shares series 14; (k) 2,000,000 Class A preferred shares series 15; (l) 7,974,528 Class A preferred shares series 17; (m) 7,982,779 Class A preferred shares series 18; (n) no Class A preferred shares series 21; (o) no Class A preferred shares series 22; (p) 9,394,250 Class A preferred shares series 24; (q) 1,533,133 Class A preferred shares series 25; (r) 9,903,348 Class A preferred shares series 26; (s) 9,394,373 Class A preferred shares series 28; (t) 9,936,637 Class A preferred shares series 30; (u) 11,982,568 Class A preferred shares series 32; (v) 9,977,889 Class A preferred shares series 34; (w) 7,972,388 Class A preferred shares series 36; (x) 7,971,773 Class A preferred shares series 37; (y) 8,000,000 Class A preferred shares series 38; (z) 12,000,000 Class A preferred shares series 40; (aa) 12,000,000 Class A preferred shares series 42; (bb) 10,000,000 Class A preferred shares series 44; (cc) 12,000,000 Class A Preferred shares series 46; and (dd) no Class AA preferred shares were issued and outstanding.
5. The corporate headquarters of the Selling Shareholder are located in the Province of Ontario.
6. The Selling Shareholder does not own, directly or indirectly, more than 5% of the issued and outstanding Class A Shares.
7. The Selling Shareholder is the beneficial owner of at least 2,000,000 Class A Shares. All of the Subject Shares are held by the Selling Shareholder in the Province of Ontario. None of the Subject Shares were acquired by, or on behalf of, the Selling Shareholder in anticipation or contemplation of resale to the Issuer.
8. No Class A Shares were purchased by, or on behalf of, the Selling Shareholder on or after January 4, 2017, being the date that was 30 days prior to the date of the Application, in anticipation or contemplation of a sale of Class A Shares to the Issuer.
9. The Subject Shares are held by the Selling Shareholder in connection with arrangements to hedge client transactions in respect of the Class A Shares. Between the date of this Order and the date on which a Proposed Purchase (as defined below) is to be completed, the Selling Shareholder will not purchase, have purchased on its behalf, or otherwise accumulate, any Class A Shares to re-establish its holdings of Class A Shares which will have been reduced as a result of the sale of Subject Shares pursuant to the Proposed Purchases.
10. The Selling Shareholder is at arm's length to the Issuer and is not an "insider" of the Issuer, an "associate" of an "insider" of the Issuer, or an "associate" or "affiliate" of the Issuer, as such terms are defined in the Securities Act (Ontario) (the "Act"). The Selling Shareholder is an "accredited investor" within the meaning of National Instrument 45-106 Prospectus Exemptions.
11. On May 19, 2016, the Issuer announced the renewal of its normal course issuer bid (the "Normal Course Issuer Bid") to purchase for cancellation, during the 12-month period beginning on May 24, 2016 and ending on May 23, 2017, up to 83,751,863 Class A Shares, representing approximately 10% of the public float of the Class A Shares as of the date specified in the Notice of Intention to Make a Normal Course Issuer Bid (the "Notice"), which was submitted to, and accepted by, the TSX. An amendment to the Notice dated February 6, 2017 to provide for the ability of the Issuer to purchase Class A Shares under its Normal Course Issuer Bid pursuant to private agreements under issuer bid exemption orders issued by securities regulatory authorities (each, an "Off-Exchange Block Purchase") was accepted by the TSX on February 8, 2017. The Notice, as amended, specifies that purchases made under the Normal Course Issuer Bid are to be conducted through the facilities of the TSX or alternative trading systems, if eligible, or by such other means as may be permitted by the TSX in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the "TSX NCIB Rules") or a securities regulatory authority, including by Off-Exchange Block Purchases. The TSX has been advised of the Issuer's intention to enter into the Proposed Purchases and has confirmed that it has no objection to the Proposed Purchases.
12. On May 19, 2016, the Issuer announced the renewal of its automatic share purchase plan ("ASPP") to permit the Issuer to make purchases under its Normal Course Issuer Bid at such times when the Issuer would not be permitted to trade in the Class A Shares, including during internal blackout periods (each such time, a "Blackout Period"). The ASPP was pre-cleared by the TSX and complies with the TSX NCIB Rules, applicable securities laws and this Order. Under the ASPP, at times it is not subject to blackout restrictions, the Issuer may, but is not required to, instruct the designated broker under the ASPP (the "ASPP Broker") to make purchases under its Normal Course Issuer Bid in accordance with the terms of the ASPP. Such purchases will be determined by the ASPP Broker in its sole discretion based on parameters established by the Issuer prior to any Blackout Period in accordance with TSX rules, applicable securities laws (including this Order) and the terms of the agreement between the ASPP Broker and the Issuer. If the Issuer determines to instruct the ASPP Broker to make purchases under the ASPP during a particular Blackout Period, the Issuer will instruct the ASPP Broker not to conduct a block purchase (a "Block Purchase") in reliance on the block purchase exception in clause 629(l)7 of the TSX NCIB Rules in the calendar week in which either: (a) the Issuer completes a Proposed Purchase; or (b) a Blackout Period ends and a new trading window of the Issuer opens.
13. As at February 3, 2017, the Issuer has not purchased any Class A Shares under the Normal Course Issuer Bid, whether through the facilities of a marketplace or pursuant to Off-Exchange Block Purchases.
14. The Issuer and the Selling Shareholder intend to enter into one or more agreements of purchase and sale (each, an "Agreement") pursuant to which the Issuer will agree to purchase some or all of the Subject Shares from the Selling Shareholder by way of one or more trades, each occurring before April 14, 2017 (each such purchase, a "Proposed Purchase") for a purchase price (each such price, a "Purchase Price" in respect of such Proposed Purchase) that will be negotiated at arm's length between the Issuer and the Selling Shareholder. The Purchase Price will, in each case, be at a discount to the prevailing market price and below the prevailing bid-ask price for the Class A Shares on the TSX at the time of the relevant Proposed Purchase.
15. The Subject Shares acquired under each Proposed Purchase will constitute a "block" as that term is defined in section 628 of the TSX NCIB Rules.
16. The purchase of any of the Subject Shares by the Issuer pursuant to an Agreement will constitute an "issuer bid" for the purposes of NI 62-104, to which the applicable Issuer Bid Requirements would apply.
17. Because the Purchase Price will, in each case, be at a discount to the prevailing market price and below the prevailing bid-ask price for the Class A Shares on the TSX at the time of the relevant Proposed Purchase, none of the Proposed Purchases can be made through the TSX trading system and, therefore, will not occur "through the facilities" of the TSX. As a result, the Issuer will be unable to acquire Subject Shares from the Selling Shareholder in reliance on the exemption from the Issuer Bid Requirements in subsection 4.8(2) of NI 62-104.
18. But for the fact that the Purchase Price will be at a discount to the prevailing market price and below the prevailing bid-ask price for the Class A Shares on the TSX at the time of the relevant Proposed Purchase, the Issuer could otherwise acquire the applicable Subject Shares through the facilities of the TSX as a Block Purchase in reliance on the block purchase exception in clause 629(l)7 of the TSX NCIB Rules and the exemption from the Issuer Bid Requirements in subsection 4.8(2) of NI 62-104.
19. The sale of any of the Subject Shares to the Issuer will not be a "distribution" (as defined in the Act).
20. For each Proposed Purchase, the Issuer will be able to acquire the applicable Subject Shares from the Selling Shareholder without the Issuer being subject to the dealer registration requirements of the Act.
21. Management of the Issuer is of the view that: (a) through the Proposed Purchases, the Issuer will be able to purchase the Subject Shares at a lower price than the price at which it would otherwise be able to purchase Class A Shares under the Normal Course Issuer Bid in accordance with the TSX NCIB Rules and the exemption from the Issuer Bid Requirements in subsection 4.8(2) of NI 62-104; and (b) the Proposed Purchases are an appropriate use of the Issuer's funds.
22. The purchase of Subject Shares will not adversely affect the Issuer or the rights of any of the Issuer's security holders and will not materially affect control of the Issuer. To the knowledge of the Issuer, the Proposed Purchases will not prejudice the ability of other security holders of the Issuer to otherwise sell Class A Shares in the open market at the then-prevailing market price. The Proposed Purchases will be carried out at minimal cost to the Issuer.
23. To the best of the Issuer's knowledge, as of December 31, 2016, the "public float" for the Class A Shares represented approximately 85% of all the issued and outstanding Class A Shares for purposes of the TSX NCIB Rules.
24. The Class A Shares are "highly-liquid securities" within the meaning of section 1.1 of OSC Rule 48-501 Trading during Distributions, Formal Bids and Share Exchange Transactions and section 1.1 of the Universal Market Integrity Rules.
25. Other than the Purchase Price, no fee or other consideration will be paid by the Issuer in connection with the Proposed Purchases.
26. At the time that each Agreement is negotiated or entered into by the Issuer and the Selling Shareholder and at the time of each Proposed Purchase, neither the Issuer, nor any member of the Trading Products group of the Selling Shareholder, nor any personnel of the Selling Shareholder that negotiated the Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Agreement and sell the Subject Shares, will be aware of any "material change" or any "material fact" (each as defined in the Act) in respect of the Issuer that has not been generally disclosed.
27. The Issuer will not make any Proposed Purchase unless it has first obtained confirmation in writing from the Selling Shareholder that, between the date of the Order and the date on which a Proposed Purchase is to be completed, the Selling Shareholder has not purchased, had purchased on its behalf, or otherwise accumulated, any Class A Shares to re-establish its holdings of Class A Shares which will have been reduced as a result of the sale of Subject Shares pursuant to the Proposed Purchases.
28. The Issuer has made two other applications to the Commission for exemptive relief from the Issuer Bid Requirements in connection with the proposed purchases by the Issuer of: (a) up to 2,000,000 Class A Shares from The Toronto-Dominion Bank; and (b) up to 2,000,000 Class A Shares from The Bank of Nova Scotia (the "Concurrent Applications").
29. The Issuer will not purchase, pursuant to Off-Exchange Block Purchases, in aggregate, more than one-third of the maximum number of Class A Shares that the Issuer can purchase under the Normal Course Issuer Bid, such one-third being equal to 27,917,287 Class A Shares as of the date of this Order, taking into account, for greater certainty, the Subject Shares and the Class A Shares which are the subject of the Concurrent Applications.
30. No Agreement will be negotiated or entered into during a time when the Issuer would not be permitted to trade in the Class A Shares, including during a Blackout Period. If a Blackout Period is in effect, the Issuer will not purchase Subject Shares pursuant to the Proposed Purchases until the later of: (a) the end of such Blackout Period; and (b) the passage of two clear trading days from the date of the dissemination to the public of the Issuer's financial results and/or any and all "material changes" or any "material facts" (each as defined in the Act) in respect of the Issuer or the Class A Shares relating to such Blackout Period.
31. Assuming completion of the purchase of: (a) the maximum number of Subject Shares, being 2,000,000 Class A Shares; and (b) the maximum number of Class A Shares that are the subject of the Concurrent Applications, being 4,000,000 Class A Shares, the Issuer will have purchased under the Normal Course Issuer Bid an aggregate of 6,000,000 Class A Shares pursuant to Off-Exchange Block Purchases, representing approximately 7.16% of the maximum 83,751,893 Class A Shares authorized to be purchased under the Normal Course Issuer Bid.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED pursuant to section 6.1 of NI 62-104 that the Issuer be exempt from the Issuer Bid Requirements in connection with the Proposed Purchases, provided that:
(a) the Proposed Purchases will be taken into account by the Issuer when calculating the maximum annual aggregate limit that is imposed upon the Issuer's Normal Course Issuer Bid in accordance with the TSX NCIB Rules;
(b) the Issuer will refrain from conducting either a Block Purchase in accordance with the TSX NCIB Rules or another Off-Exchange Block Purchase during the calendar week in which it completes a Proposed Purchase and will not make any further purchases under the Normal Course Issuer Bid for the remainder of the calendar day on which it completes a Proposed Purchase;
(c) the Purchase Price in respect of each Proposed Purchase will be at a discount to the last "independent trade" (as that term is used in clause 629(l)1 of the TSX NCIB Rules) of a board lot of Class A Shares immediately prior to the execution of such Proposed Purchase;
(d) the Issuer will otherwise acquire any additional Class A Shares pursuant to the Normal Course Issuer Bid in accordance with the Notice and the TSX NCIB Rules, including by means of open market transactions and by such other means as may be permitted by the TSX, and, subject to condition (i) below, by Off-Exchange Block Purchases;
(e) immediately following each Proposed Purchase of Subject Shares from the Selling Shareholder, the Issuer will report the purchase of such Subject Shares to the TSX;
(f) at the time that each Agreement is negotiated or entered into by the Issuer and the Selling Shareholder and at the time of each Proposed Purchase, neither the Issuer, nor any member of the Trading Products group of the Selling Shareholder, nor any personnel of the Selling Shareholder that negotiated the Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Agreement and sell the Subject Shares, will be aware of any "material change" or "material fact" (each as defined in the Act) in respect of the Issuer that has not been generally disclosed;
(g) in advance of the first Proposed Purchase, the Issuer will issue a press release disclosing (i) its intention to make the Proposed Purchases, and (ii) that information regarding each Proposed Purchase, including the number of Subject Shares purchased and the aggregate Purchase Price, will be available on the System for Electronic Document Analysis and Retrieval ("SEDAR") following the completion of each Proposed Purchase;
(h) the Issuer will report information regarding each Proposed Purchase, including the number of Subject Shares purchased and the aggregate Purchase Price, on SEDAR before 5:00 p.m. (Toronto time) on the business day following the completion of such Proposed Purchase;
(i) the Issuer does not purchase, pursuant to Off-Exchange Block Purchases, in the aggregate, more than one-third of the maximum number of Class A Shares the Issuer can purchase under its Normal Course Issuer Bid, such one-third being equal to, as of the date of this Order, 27,917,287 Class A Shares; and
(j) the Issuer will not make any Proposed Purchase unless it has first obtained confirmation in writing from the Selling Shareholder that between the date of this Order and the date on which a Proposed Purchase is to be completed, the Selling Shareholder has not purchased, had purchased on its behalf, or otherwise accumulated any Class A Shares to re-establish its holdings of Class A Shares which will have been reduced as a result of the sale of Subject Shares pursuant to the Proposed Purchases.
DATED at Toronto, Ontario this 15th day of February, 2017.