Brookfield Business Partners L.P.
Headnote
Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from the requirement to call a meeting of unitholders to consider a proposed related party transaction and to send an information circular to such unitholders -- the issuer will be selling an asset to a consortium that is majority owned by an affiliated entity rendering the transaction subject to the formal valuation and minority approval requirements of MI 61-101 -- issuer has received written confirmation from unitholders holding a majority of the units eligible to be counted in determining minority approval under Part 8 of MI 61-101 that they will consent to the proposed transaction -- disclosure document containing the disclosure required by section 5.3 of MI 61-101 will be provided to each unitholder from whom consent is being sought -- issuer obtained a formal valuation prepared in accordance with MI 61-101 that was summarized in the disclosure document and filed on SEDAR -- exemption sought granted, subject to conditions, including that no executed consents are obtained by the issuer until at least 14 days have passed from the date the relevant supporting unitholders were provided with the disclosure document and form of written consent, and the issuer will not close the proposed transaction unless and until (i) the supporting unitholders have had at least 14 days to review the disclosure document, and (ii) 14 days have elapsed from the date the latest of the disclosure document, form of written consent, formal valuation and fairness opinion were filed on SEDAR.
Applicable Legislative Provisions
Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, ss. 5.3, 5.6, 8.1 and 9.1(2).
Companion Policy 61-101CP to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, s. 3.1.
December 23, 2022
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF BROOKFIELD BUSINESS PARTNERS L.P. (the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Filer from the requirement in subsection 5.3(2) of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) to call a meeting of Unitholders (as defined below) to consider the Proposed Transaction (as defined below) and to send an information circular to Unitholders (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, Manitoba, New Brunswick, Québec and Saskatchewan.
Interpretation
Terms defined in National Instrument 14-101 Definitions, MI 11-102 and MI 61-101 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
Relevant Entities
The Filer
1. The Filer is an exempted limited partnership established, registered and in good standing under the laws of Bermuda. The Filer's registered and head office is located at 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda.
2. The Filer is a reporting issuer in all of the provinces and territories of Canada and is an SEC foreign issuer within the meaning of section 1.1 of National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102) and satisfies its continuous disclosure obligations by complying with U.S. federal securities laws as is permitted under NI 71-102. The Filer is not in default of any requirement of securities legislation in the jurisdictions in which it is a reporting issuer.
3. The authorized capital of the Filer consists of: (a) non-voting limited partnership units (the Units, and holders thereof, Unitholders); and (b) general partnership interests. As of September 30, 2022, there were 74,612,502 Units (217,273,585 Units assuming the exchange of redeemable partnership units of Brookfield Business L.P. (Holding LP, and such units, the Holding LP REUs) and class A exchangeable subordinate voting shares of Brookfield Business Corporation (the BBUC Exchangeable Shares)) and 4 general partnership units issued and outstanding.
4. The Units are listed on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX) under the symbols "BBU" and "BBU.UN", respectively.
5. The Filer's only substantial asset is its limited partnership interest in Holding LP, a Bermuda exempted limited partnership established, registered and in good standing under the laws of Bermuda.
6. Brookfield Business Partners Limited (the General Partner), a wholly-owned subsidiary of Brookfield Corporation (formerly known as Brookfield Asset Management Inc.) holds the general partnership interest in the Filer.
Brookfield Corporation
7. Brookfield Corporation is a corporation existing and in good standing under the Business Corporations Act (Ontario). Brookfield Corporation's registered and head office is located at Suite 100, Brookfield Place, 181 Bay Street, Toronto, Ontario M5J 2T3.
8. Brookfield Corporation is a reporting issuer in all of the provinces and territories of Canada and is not in default of any requirement of securities legislation in the jurisdictions in which it is a reporting issuer.
9. The class A limited voting shares of Brookfield Corporation are listed on the NYSE and the TSX under the symbol "BN".
10. Brookfield Corporation holds an approximate 65% economic interest in the Filer on a fully-exchanged basis through its indirect ownership of Units, Holding LP REUs and BBUC Exchangeable Shares.
11. Brookfield Corporation indirectly holds a 100% voting interest in the Filer through its ownership of the general partner interest of the Filer.
12. Brookfield Corporation holds an approximate 48% economic interest in Brookfield Renewable Partners L.P. (BEP) on a fully-exchanged basis through its indirect ownership of redeemable partnership units of Brookfield Renewable Energy L.P. (BRELP) and exchangeable shares of Brookfield Renewable Corporation.
13. Brookfield Corporation indirectly holds a 100% voting interest in BEP through its ownership of the general partner interest of BEP.
14. Affiliates of Brookfield Corporation provide management, administrative and advisory services under a master services agreement with each of (a) the Filer, Holding LP and certain of their subsidiaries, and (b) BEP, BRELP and certain of their subsidiaries.
The Proposed Transaction
15. On October 11, 2022, the Filer issued and filed a press release announcing that it entered into an equity purchase agreement (the Equity Purchase Agreement) pursuant to which the Filer and its institutional partners have agreed to sell its nuclear technology services operation, Westinghouse Electric Company LLC (Westinghouse), to a strategic consortium of buyers (the Buyer Consortium, and such transaction, the Proposed Transaction) led by BEP and Cameco Corporation (Cameco).
16. The Equity Purchase Agreement provides for the indirect acquisition of Westinghouse by the Buyer Consortium through Watt New Aggregator L.P. (the Acquisition Partnership). Cameco (directly or through one or more affiliated entities) holds a 49% interest in the Acquisition Partnership, and BEP and its institutional partners (through one or more affiliated entities) holds the remaining 51% interest in the Acquisition Partnership.
17. The Filer, through certain subsidiaries, including Brookfield Business Corporation (the Filer and such subsidiaries, collectively, the BBU Business) holds an approximate 44% indirect equity interest in Westinghouse (theEquity Interest) and the BBU Business expects to receive US$1.628 billion in cash proceeds for the Equity Interest pursuant to the Proposed Transaction.
18. BEP is pursuing the Proposed Transaction through the Brookfield Global Transition Fund I and expects to acquire approximately 17% of the Equity Interest.
19. The Filer is an affiliate of Brookfield Corporation, and BEP, which is part of the Buyer Consortium, is also an affiliate of Brookfield Corporation. As a result, the Proposed Transaction constitutes a "related party transaction" of the Filer as defined in MI 61-101, requiring the provision of a "formal valuation" and the receipt of "minority approval" (as such terms are defined in MI 61-101) in the absence of exemptions therefrom.
20. The Proposed Transaction was reviewed by the Governance and Nominating Committee of the General Partner, which is comprised of independent directors (within the meaning of MI 61-101) (the Independent Committee). The Independent Committee retained Stikeman Elliott LLP as its independent Canadian legal counsel.
21. The Independent Committee retained Tudor, Pickering, Holt & Co. Securities -- Canada, ULC (the Valuator), the energy investment and merchant banking business of Perella Weinberg Partners, as independent valuator (within the meaning of MI 61-101) to prepare a formal valuation of the Equity Interest (the Formal Valuation) and to provide an opinion (the Fairness Opinion) as to the fairness, from a financial point of view, of the consideration to be received by the BBU Business for the Equity Interest under the Proposed Transaction.
22. Based upon its analysis and subject to the assumptions, limitations and qualifications set forth in the single document containing both the Formal Valuation and the Fairness Opinion, the Valuator advised the Independent Committee that the fair market value of the Equity Interest was in the range of US$1,265 million to US$1,800 million. The Valuator also provided the Independent Committee with the Fairness Opinion which stated that, as of October 11, 2022 and based upon its analysis and subject to the assumptions, limitations and qualifications set forth in the Formal Valuation and Fairness Opinion, the US$1,628 million cash consideration to be received by the BBU Business for the Equity Interest pursuant to the Proposed Transaction is fair, from a financial point of view, to the BBU Business.
23. The Independent Committee, having taken into account the Formal Valuation and Fairness Opinion, and such other matters as it considered relevant, including the factors, advice and opinions received from management of Brookfield Corporation (in Brookfield Corporation's capacity as manager of the Filer pursuant to the terms of a master services agreement between them), the Filer's external advisors, and the Independent Committee's external advisors regarding the Proposed Transaction, unanimously determined that (a) the consideration to be received directly and indirectly by the BBU Business pursuant to the Proposed Transaction is fair, from a financial point of view to the BBU Business and (b) the Proposed Transaction is in the best interests of the Filer. Accordingly, the Independent Committee unanimously recommended that the board of directors of the General Partner (the Board) (i) authorize and approve the Proposed Transaction and recommend that Unitholders vote in favour of the anticipated resolution of Unitholders to approve the Proposed Transaction, (ii) authorize and approve the General Partner, in its capacity as general partner of the Filer, to enter into and perform its obligations under the Equity Purchase Agreement, the Support Agreements (as defined below) and certain other ancillary documents relating to the Proposed Transaction, and (iii) take such other steps and actions as it considers necessary and advisable to implement and complete the Proposed Transaction.
24. The Board having carefully and fully considered and taken into account the unanimous recommendation of the Independent Committee, the Independent Committee's receipt of the Formal Valuation and Fairness Opinion, and such other matters as it considered relevant, including the factors, advice and opinions received from management of Brookfield Corporation (in Brookfield Corporation's capacity as manager of the Filer pursuant to the terms of a master services agreement between them) and the Filer's external advisors, unanimously resolved (excluding conflicted directors who did not participate in deliberations) (a) that the consideration to be received directly and indirectly by the BBU Business in connection with the Proposed Transaction is fair, from a financial point of view to the Filer, (b) that the Proposed Transaction is in the best interests of the Filer, (c) that the Proposed Transaction was authorized and approved, and (d) to recommend that Unitholders vote in favour of the Proposed Transaction. The Board, on behalf of the General Partner, in its capacity as general partner of the Filer, authorized and approved the entering into by the General Partner, in its capacity as general partner of the Filer, of the Equity Purchase Agreement, the Support Agreements (as defined below), and certain other ancillary documents, and authorized it to perform its obligations under such agreements.
25. In order for the Proposed Transaction to proceed, the Filer is required by section 5.6 of MI 61-101 to obtain "minority approval" (as defined in MI 61-101) in accordance with Part 8 of MI 61-101 (the Minority Approval). Section 5.3(2) of MI 61-101 also requires that the Filer call a meeting of Unitholders (the Meeting) and send an information circular to Unitholders.
26. Prior to entering into the Equity Purchase Agreement, the Filer approached certain Unitholders, being OMERS Public Investments Holdings Inc. and RBC Global Asset Management, Inc., (each an Initial Supporting Unitholder and collectively, the Initial Supporting Unitholders) to request their support for the Proposed Transaction. The Filer and the Buyer Consortium entered into support agreements dated October 11, 2022 with each of the Initial Supporting Unitholders (the Support Agreements) pursuant to which they have agreed, among other things, to vote or cause to be voted all its Units at the Meeting in favour of the Proposed Transaction. The Initial Supporting Unitholders collectively hold, as of the dates of their respective Support Agreements, 18,438,086 Units, representing approximately 25% of the issued and outstanding Units (without giving effect to the exchange or conversion of any Holding LP REUs or BBUC Exchangeable Shares into Units) and approximately 37% of the Units eligible to vote for the purposes of the Minority Approval required for the Proposed Transaction.
27. Subsequent to entering into the Equity Purchase Agreement, the Filer approached CI Investments Inc., CIBC Asset Management, Inc. and Beutel Goodman & Company Ltd. to request their support for the Proposed Transaction. The Filer received written confirmation from these Unitholders (collectively with the Initial Supporting Unitholders, the Supporting Unitholders) who, as of the dates of their respective written confirmations, collectively hold 9,089,953 Units, representing approximately 12% of the issued and outstanding Units (without giving effect to the exchange or conversion of any Holding LP REUs or BBUC Exchangeable Shares into Units) and approximately 19% of the Units eligible to vote for the purposes of the Minority Approval required for the Proposed Transaction, that they will consent to the Proposed Transaction.
28. The Supporting Unitholders collectively hold, as of the dates of their respective Support Agreements or written confirmations, as applicable, 27,528,039 Units, representing approximately 37% of the issued and outstanding Units (without giving effect to the exchange or conversion of any Holding LP REUs or BBUC Exchangeable Shares into Units) and approximately 56% of the issued and outstanding Units eligible to vote for the purposes of the Minority Approval required for the Proposed Transaction, which exceeds the simple majority requirement set out in MI 61-101.
29. As the Filer believes that holders of a majority of the Units eligible to be voted at the Meeting would vote in favour of the Proposed Transaction, the Filer wishes to obtain the Minority Approval by way of written consent of Unitholders as opposed to at the Meeting.
30. Each of the Supporting Unitholders is a sophisticated investor and satisfies the "accredited investor" requirements set forth in section 1.1. of National Instrument 45-106 Prospectus Exemptions.
31. No Supporting Unitholder is:
(a) an interested party (as such term is defined in MI 61-101);
(b) a related party of an interested party; or
(c) a joint actor with a person or company referred to in (a) or (b) above in respect of the Proposed Transaction.
32. Each of the Supporting Unitholders will be provided with a copy of a disclosure document pertaining to the Proposed Transaction whose contents satisfy and comply with the disclosure requirements set out in subsection 5.3(3) of MI 61-101 (the Disclosure Document), with a form of written consent appended thereto (the Consent, and together with the Disclosure Document, the Transaction Disclosure Documents). The Transaction Disclosure Documents will set out the relevant details of the Proposed Transaction and the Consent will include an acknowledgement from the Supporting Unitholder that such Supporting Unitholder has had a minimum of 14 days from the time that it received the Transaction Disclosure Documents to review such documents.
33. None of the Supporting Unitholders is obligated to provide the Filer with an executed Consent and each Supporting Unitholder will make their respective determination on whether to provide the Filer with an executed Consent based on its review and consideration of the Transaction Disclosure Documents.
34. No Supporting Unitholder has received, or will receive, directly or indirectly, any payment, beneficial enhancement, collateral benefit or inducement of any kind in respect of the Proposed Transaction or in connection with agreeing to execute the Consent.
35. The Formal Valuation and Fairness Opinion will be summarized in the Disclosure Document. Concurrently with the provision of the Transaction Disclosure Documents to Supporting Unitholders, the Formal Valuation and Fairness Opinion will be filed on the System for Electronic Document Analysis and Retrieval (SEDAR).
36. A copy of the Transaction Disclosure Documents and/or Formal Valuation and Fairness Opinion will be sent free of charge to any requesting Unitholder.
37. The Filer will not obtain executed Consents until at least 14 days have passed from the date the relevant Supporting Unitholder received the Transaction Disclosure Documents.
38. The Filer will not close the Proposed Transaction unless and until (a) the Supporting Unitholders have had at least 14 days to review the Transaction Disclosure Documents, and (b) 14 days have elapsed from the date the latest of the Transaction Disclosure Documents and the Formal Valuation and Fairness Opinion were filed on SEDAR.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:
(a) the Filer receives executed copies of Consents from Unitholders holding a majority of the Units eligible to vote for the purposes of the Minority Approval required for the Proposed Transaction;
(b) no executed Consents are obtained by the Filer until at least 14 days have passed from the date that the relevant Unitholders were provided with the Transaction Disclosure Documents;
(c) each Supporting Unitholder is provided with the Transaction Disclosure Documents and a copy of this decision;
(d) concurrently with the provision of the Transaction Disclosure Documents to Supporting Unitholders, copies of the Transaction Disclosure Documents and the Formal Valuation and Fairness Opinion were filed on SEDAR;
(e) the Disclosure Document contains the information required pursuant to section 5.3 of MI 61-101 and also discloses that:
(i) the Filer has applied for the Exemption Sought, and that this decision has been issued which allows the Filer to obtain the Minority Approval by way of written consent as opposed to at a meeting of Unitholders;
(ii) the Filer intends to seek written consent from the Supporting Unitholders; and
(iii) if the Filer does not obtain executed Consents from Unitholders holding a majority of the Units eligible to vote for the purposes of the Minority Approval required for the Proposed Transaction, the Filer will call a meeting of Unitholders to seek the Minority Approval and send an information circular to Unitholders in accordance with MI 61-101;
(f) no Supporting Unitholder has received, or will receive, directly or indirectly, any payment, beneficial enhancement, collateral benefit or inducement of any kind in respect of the Proposed Transaction or in connection with agreeing to execute the Consent;
(g) the Filer will not close the Proposed Transaction unless and until (i) the Supporting Unitholders have had at least 14 days to review the Disclosure Document, and (ii) 14 days have elapsed from the date the latest of the Transaction Disclosure Documents and the Formal Valuation and Fairness Opinion were filed on SEDAR;
(h) any Unitholder that requests a copy of the Transaction Disclosure Documents and/or Formal Valuation and Fairness Opinion is sent a copy, free of charge; and
(i) there are no other approvals required in respect of the Proposed Transaction which must be obtained at a meeting of Unitholders.