DTR LLC
Headnote
Section 6.1 of NI 62-104 -- Exemption from the formal take-over bid requirements -- Filer Group propose to make normal course purchases of subordinate voting shares of the issuer -- Filer converted a block of the issuer's multiple voting shares into an equal number of subordinate voting shares and immediately disposed of such shares in secondary offering within previous 12-month period -- Filer cannot rely on the normal course purchase exemption set out in section 4.1 of NI 62-104 -- Filer seeking flexibility for Filer Group to purchase additional subordinate voting shares in the market and to provide liquidity -- Filer Group granted relief to acquire subordinate voting shares in the normal course provided that such purchases satisfy the requirements of section 4.1 of NI 62-104, except that, for the purpose of calculating the 5% purchase limit, the subordinate voting shares of the issuer acquired by the Filer Group in connection with the prior conversion will be excluded -- Issuer advised of and supports the application.
August 16, 2019
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 DTR LLC (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) for an exemption (the Exemption Sought) pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104) from the requirements applicable to take-over bids in Part 2 of NI 62-104 in respect of certain normal course market purchases of SVS of the Issuer by members of the Filer Group (each such term as defined herein).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) The Ontario Securities Commission (the OSC) 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 each of the provinces and territories of Canada, other than Ontario.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
The decision is based on the following facts represented by the Filer:
The Issuer
1. Canada Goose Holdings Inc. (the Issuer) is a corporation incorporated under the Business Corporations Act (British Columbia).
2. The Issuer's head office is located at 250 Bowie Avenue, Toronto, Ontario.
3. The Issuer is a reporting issuer in each of the provinces and territories of Canada and is not in default of the securities legislation in any of these jurisdictions.
4. The Issuer's authorized share capital consists of: (i) an unlimited number of subordinate voting shares (SVS), (ii) an unlimited number of multiple voting shares (MVS and together with the SVS, the Shares), and (iii) an unlimited number of preferred shares, issuable in series. All of the outstanding MVS are held by Brent (BC) Participation S.à. r.l. (Brent), an entity managed by Bain Capital, and the Filer, DTR (CG) II Limited Partnership and DTR (CG) Limited Partnership, each of which are indirectly controlled by the Issuer's Chairman and Chief Executive Officer.
5. Holders of MVS are entitled to 10 votes per MVS and holders of SVS are entitled to one vote per SVS on all matters upon which holders of shares in the capital of the Issuer are entitled to vote. The SVS are not convertible into any other class of shares. Each outstanding MVS may at any time, at the option of the holder, be converted into one SVS.
6. Pursuant to the Issuer's articles, on the first date that any MVS is held by a person other than certain Permitted Holders (as defined below), the Permitted Holder which held such MVS until such date, without any further action, is automatically deemed to have exercised its rights to convert such MVS into SVS. The "Permitted Holders" of MVS are comprised of two groups of persons, namely (i) the "Bain Group Permitted Holders", which include Brent, any of Brent's affiliates (which for the purposes of this definition, in respect of any specified person, includes any person which directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with the specified person) and entities controlled, directly or indirectly, or managed by Bain Capital L.P. or any affiliates of Bain Capital L.P. (the Bain Group), and (ii) the "Reiss Group Permitted Holders", which include Dani Reiss, the Issuer's Chairman and Chief Executive Officer, certain members of his immediate family and any person controlled, directly or indirectly by one or more of the foregoing persons, which for greater certainty includes the Filer (the Filer Group).
7. As of July 26, 2019, 58,502,884 SVS, 51,004,076 MVS and no preferred shares were issued and outstanding. The SVS represent approximately 10.29% of the aggregate voting rights attached to all of the Issuer's outstanding Shares and the MVS represent approximately 89.71% of the aggregate voting rights attached to all of the Issuer's outstanding Shares.
8. The SVS are listed on both the Toronto Stock Exchange (the TSX) and the New York Stock Exchange (the NYSE) under the symbol "GOOS". The MVS are not listed on any exchange or marketplace.
The Filer
9. The Filer is a limited liability company continued in the State of Delaware. The Filer's registered office is 2711 Centreville Road, Suite 400, Wilmington, New Castle, Delaware, 19808.
10. The Filer is owned by Black Feather Holdings Incorporated which in turn is owned by Down The Road Enterprises Incorporated which in turn is owned by Dani Reiss, the Chairman and Chief Executive Officer of the Issuer.
11. In connection with the Issuer's initial public offering (the IPO) in March 2017, the Issuer undertook certain pre-closing capital changes (the Pre-Closing Capital Changes). As a result of the Pre-Closing Capital Changes, the Filer, DTR (CG) II Limited Partnership and DTR (CG) Limited Partnership exchanged existing equity interests for an aggregate of 30,000,000 MVS. Following the Pre-Closing Capital Changes and in connection with the IPO, the Filer converted an aggregate of 5,007,554 MVS into SVS and immediately sold them to the underwriters of the IPO.
12. Since the IPO, the Filer has converted MVS into SVS, and immediately disposed of such SVS in the context of public secondary offerings as follows:
(a) in June of 2017, the Filer converted an aggregate of 1,862,112 MVS into SVS and immediately sold them to certain underwriters under a secondary offering of SVS conducted pursuant to (i) a Canadian supplemented short form PREP prospectus dated June 27, 2017 and (ii) a prospectus dated June 27, 2017 contained in a registration statement on Form F-1 filed in the United States;
(b) in June of 2018, the Filer converted an aggregate 1,500,000 MVS into SVS and immediately sold them to certain underwriters under a secondary offering of SVS conducted pursuant to (i) a Canadian prospectus supplement dated June 20, 2018, supplementing a short form base shelf prospectus dated April 17, 2018 and (ii) a prospectus supplement dated June 20, 2018, supplementing a prospectus dated June 20, 2018 contained in a registration statement on Form F-3 filed in the United States; and
(c) in November 2018, the Filer converted an aggregate of 1,500,000 MVS into SVS (the November 2018 Reiss MVS Conversion) and immediately sold them to certain underwriters under a secondary offering of SVS conducted pursuant to (i) a Canadian prospectus supplement dated November 26, 2018, supplementing an amended and restated short form base shelf prospectus dated November 21, 2018 and (ii) a prospectus supplement dated November 28, 2018, supplementing a prospectus dated June 20, 2018 contained in a registration statement on Form F-3 filed in the United States, under a secondary offering of SVS (the November 2018 Secondary Offering).
13. As of the date hereof, entities comprising the Filer Group have stock options exercisable into 368,879 SVS and have beneficial ownership of and control over 20,130,334 MVS in the aggregate (the Filer Group MVS). As of July 26, 2019, the Filer Group MVS represent approximately 39.47% of the outstanding MVS, approximately 35.41% of the votes attaching to all of the Issuer's outstanding Shares, and approximately 18.38% of all of the Issuer's outstanding Shares.
14. No member of the Filer Group has purchased any SVS of the Issuer in the last twelve months in reliance on the exemption from the formal bid requirements in section 4.1 of NI 62-104 that permits the purchase in any twelve-month period of not more than 5% of the SVS outstanding at the beginning of such twelve-month period (the Normal Course Purchase Exemption).
15. The Filer is not in default of the securities legislation in the jurisdictions in which the Issuer is a reporting issuer.
The Bain Group
16. As of August 1, 2019, Brent does not own any SVS and has beneficial ownership of and control over 30,873,742 MVS (the Brent MVS). As of July 26, 2019, the Brent MVS represent approximately 60.53% of the outstanding MVS, approximately 54.30% of the votes attaching to all of the Issuer's outstanding Shares, and approximately 28.19% of all of the Issuer's outstanding Shares. Other than MVS owned by Brent, no member of the Bain Group currently owns, or controls or directs, Shares.
17. In November 2018, Brent converted an aggregate of 8,490,000 MVS into SVS (the November 2018 Bain MVS Conversion), of which (x) 1,087,500 MVS were converted into SVS on November 26, 2018 and immediately gifted to certain registered charities as charitable donations (which charities subsequently elected to sell such SVS in the November 2018 Secondary Offering), and (y) 7,402,500 MVS were converted into SVS on November 29, 2018 and immediately sold by Brent to certain underwriters under the November 2018 Secondary Offering.
Potential Normal Course Purchases
18. The Filer Group contemplates purchasing SVS on the TSX, the NYSE or otherwise in accordance with the parameters of the Normal Course Purchase Exemption from time to time, as it considers appropriate, subject to market conditions. Any such purchase (a Normal Course Purchase), when aggregated with the other acquisitions of SVS by the Filer Group or any person acting jointly or in concert with the Filer Group in the twelve-month period preceding the purchase, other than (i) the acquisition of SVS by the Filer pursuant to the November 2018 Reiss MVS Conversion, and (ii) to the extent the Filer Group is acting jointly or in concert with the Bain Group at the time of any such Normal Course Purchase, the SVS acquired by Brent in the November 2018 Bain MVS Conversion, would not exceed 5% of the SVS outstanding at the commencement of such twelve-month period.
19. The Filer Group currently intends to make any Normal Course Purchase of SVS for investment purposes based on prevailing market conditions and to provide additional liquidity in the market.
20. No member of the Filer Group has any present intention of making a bid for all of the SVS, proposing a going private transaction in respect of the Issuer or otherwise acquiring all of the issued and outstanding SVS by way of a plan of arrangement or other similar voting transaction.
21. Since the Filer exercises control or direction over more than 20% of the outstanding SVS (as determined in accordance with NI 62-104, which assumes conversion of the MVS), any offer to acquire SVS by members of the Filer Group would constitute a take-over bid under NI 62-104 requiring either a formal bid or compliance with an exemption from the formal bid requirements thereunder.
22. Since the Filer acquired SVS in the November 2018 Reiss MVS Conversion, the number of SVS that members of the Filer Group can acquire in reliance upon the Normal Course Purchase Exemption is less than the number that would otherwise be permitted.
23. Members of the Filer Group are prohibited from purchasing any Shares at any time when it has knowledge of any material fact or material change about the Issuer that has not been generally disclosed.
24. The Filer has advised the Issuer that it has submitted an application to the OSC for the Exemption Sought. Management of the Issuer supports the Exemption Sought on the basis that Normal Course Purchases of the SVS will provide additional liquidity in the market.
25. Brent has applied to the OSC for relief similar to the Exemption Sought in connection with Normal Course Purchases by the Bain Group.
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 any Normal Course Purchase by members of the Filer Group complies with the Normal Course Purchase Exemption, except that, for the purpose of determining the number of SVS acquired by any such member of the Filer Group within the twelve-month period preceding the date of any such Normal Course Purchase, the SVS acquired (i) in the November 2018 Reiss MVS Conversion; and (ii) to the extent the Filer Group is acting jointly or in concert with the Bain Group at the time of any such Normal Course Purchase, the SVS acquired by Brent in the November 2018 Bain MVS Conversion, shall be excluded in the calculation of acquisitions of SVS otherwise made by members of the Filer Group within the previous twelve-month period.