Calpine Power Income Fund et al. - MRRS Decision
Headnote
Mutual Reliance Review System -- OSC Rule 61-501 -- take-over bid and subsequent business combination -- Rule 61-501 requires sending of information circular and holding of meeting in connection with second step business combination -- target's declaration of trust provides that a resolution in writing executed by unitholders holding more than 66 2/3% of the outstanding units is valid and binding as if such voting rights had been exercised in favour of such resolution at a meeting of Unitholders -- second step business combination to be subject to minority approval, calculated in accordance with section 8.2 of Rule 61-501 -- relief granted from requirement that information circular be sent and meeting be held
Applicable Ontario Rule
OSC Rule 61-501 Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions, ss. 4.2, 9.1.
December 19, 2006
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUEBEC AND ONTARIO
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF THE
POTENTIAL TAKE-OVER BID FOR
CALPINE POWER INCOME FUND
BY AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
HARBINGER CAPITAL PARTNERS SPECIAL
SITUATIONS FUND, L.P. AND HARBINGER CAPITAL
PARTNERS MASTER FUND I, LTD.
MRRS DECISION DOCUMENT
Background
The local securities regulatory authority or regulator (the "Decision Maker") in each of Quebec and Ontario (the "Jurisdictions") has received an application from HCP Acquisition Inc. (the "Filer"), an indirect wholly-owned subsidiary of Harbinger Capital Partners Special Situations Fund, L.P. ("Harbinger Situations Fund") and Harbinger Capital Partners Master Fund I, Ltd. ("Harbinger Master Fund" and together with Harbinger Solutions Fund, collectively, the "Harbinger Funds"), in connection with a potential take-over bid (the "Bid") for Calpine Power Income Fund ("Calpine"), for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the requirements of the Legislation that:
(a) a Compulsory Acquisition or Subsequent Acquisition Transaction (each as defined below), as applicable, be approved at a meeting of the unitholders of Calpine (the "Unitholders"); and
(b) an information circular be sent to the Unitholders in connection with either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable;
be waived (the "Requested Relief").
Under the Mutual Reliance Review System for Exemptive Relief Applications:
(a) the OSC is the principal regulator, for this application; and
(b) this MRRS decision document evidences the decision of each Decision Maker.
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 decision is based on the following representations by the Filer:
1. The Filer is a company incorporated under the Companies Act (Nova Scotia) for the purposes of making the Bid. It is an indirect wholly-owned subsidiary of the Harbinger Funds. The Filer's head and registered offices are located in Halifax, Nova Scotia. The authorized share capital of the Filer is one billion common shares and one billion preferred shares.
2. Harbinger Situations Fund is a Delaware limited partnership with Harbinger Capital Partners Special Situations GP, LLC, a Delaware limited liability company, as its general partner. Harbinger Master Fund is a Cayman Islands exempt company.
3. The outstanding units of Calpine (the "Units") are held by CDS Clearing and Depository Services Inc. in book-entry only form.
4. If the Filer decides to proceed with the Bid, it is currently expected that:
(a) the Bid will be for all of the outstanding Units in consideration for a specified amount in cash to represent a premium to the market price of the Units at a level to be determined;
(b) one of the conditions of the Bid will be that there shall have been validly deposited under the Bid and not withdrawn at the expiry of the Bid that number of Units (including the Units held at the date of the expiry of the Bid by or on behalf of the Filer, the Harbinger Funds and any of their affiliates) representing at least 66?% of the Units on a fully-diluted basis;
(c) if the conditions to the Bid are satisfied (or waived by the Filer) and the Filer takes up and pays for Units deposited pursuant to the Bid, the Filer may proceed with a compulsory acquisition of the Units not deposited to the Bid as permitted by Calpine's Declaration of Trust (the "Declaration of Trust") for the same consideration per Unit as was paid under the Bid, if within 120 days after the date of the Bid, the Bid is accepted by Unitholders of not less than 90% of the Units (other than Units held at the date of the Bid by or on behalf of, or issuable to, the Filer or an affiliate or an associate of the Filer) (a "Compulsory Acquisition");
(d) in connection with either a Compulsory Acquisition, if available and if Bidco elects to proceed thereunder, or a Subsequent Acquisition Transaction (as defined below), Bidco currently intends to amend the Declaration of Trust by the Written Resolution (as defined below) to provide that non-tendering offerees will be deemed to have elected to transfer and to have transferred their Units to an offeror immediately on the giving of the offeror's notice prescribed by the Declaration of Trust notifying non-tendering offerees that, among other things, the offeror is entitled to acquire their Units by way of Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable (as opposed to 20 days after receipt of an offeror's notice, as currently provided) (the "Notice Amendment");
(e) if a Compulsory Acquisition as permitted under the Declaration of Trust is not available to Bidco or Bidco elects not to proceed under those provisions, Bidco currently intends to acquire the Units not deposited to the Bid by:
i. amending the Declaration of Trust (the "Threshold Amendment") to provide that a Compulsory Acquisition may be effected if Bidco and its affiliates, after take-up and payment of Units deposited under the Bid, hold not less than 662/3% of the Units calculated on a fully-diluted basis (a Compulsory Acquisition, amended by the Threshold Amendment, being referred to herein as a "Subsequent Acquisition Transaction"); and
ii. proceeding with the Subsequent Acquisition Transaction in respect of the Units not deposited to the Bid as permitted by the Declaration of Trust, as so amended;
(f) in order to effect either a Compulsory Acquisition, if available and if Bidco elects to proceed thereunder, or a Subsequent Acquisition Transaction in accordance with the foregoing, rather than seeking the Unitholders' approval at a special meeting of the Unitholders to be called for such purpose, the Filer intends to rely on section 10.8 of the Declaration of Trust, which specifies that a resolution in writing executed by Unitholders holding more than 66?% of the outstanding Units at any time (the "Written Resolution") is as valid as if such resolution had been passed at a meeting of Unitholders duly called and convened; which Written Resolution will approve, among other things, the Threshold Amendment and the Notice Amendment and any Compulsory Acquisition or Subsequent Acquisition Transaction undertaken in accordance therewith, as applicable;
(g) if the Filer decides not to pursue either the Compulsory Acquisition or the Subsequent Acquisition Transaction in the manner described above, the Filer reserves the right, to the extent permitted by applicable law, to purchase additional Units in the open market or in privately negotiated transactions or otherwise, or take no further action to acquire additional Units, or acquire Calpine's assets by way of an arrangement, amalgamation, merger, reorganization, consolidation, recapitalization, redemption or other transaction involving the Filer, the Harbinger Funds and/or any of their respective subsidiaries and Calpine and/or its subsidiaries. Alternatively, the Filer may sell or otherwise dispose of any or all Units acquired pursuant to the Bid;
(h) notwithstanding Section 10.8 of the Declaration of Trust, in certain circumstances the Legislation requires that the Compulsory Acquisition or the Subsequent Acquisition Transaction, as applicable, be approved at a meeting of Unitholders called for that purpose;
(i) to effect either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable, the Filer will obtain minority approval, as that term is defined in the Legislation, calculated in accordance with the terms of Section 8.2 of AMF Policy Q-27, and Section 8.2 of OSC Rule 61-501 (the "Minority Approval"), albeit not at a meeting of Unitholders, but by Written Resolution; and
(j) the offer and take-over bid circular provided to Unitholders in connection with the Bid will contain all disclosure required by applicable securities laws, including without limitation the take-over bid provisions and form requirements of the securities legislation in the Jurisdictions and the provisions of OSC Rule 61-501 relating to the disclosure required to be included in information circulars distributed in respect of business combinations.
Decision
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.
The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that Minority Approval shall have been obtained, albeit not at a meeting of Unitholders, but by Written Resolution.