Natixis Investment Managers Canada LP
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- approval for change of control of manager under s. 5.5(1)(a.1) of National Instrument 81-102 Investment Funds and abridgement of securityholder notice period under s. 5.8(1)(a) of NI 81-102 to 30 days -- acquirer has requisite experience and integrity to participate in Canadian capital markets -- transaction will not result in any material changes to operations and management of the manager or the funds it manages.
Applicable Legislative Provisions
National Instrument 81-102 Investment Funds -- ss. 5.5(1)(a.1), 5.7(1)(a), 5.8(1) and 19.1.
June 27, 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 NATIXIS INVESTMENT MANAGERS CANADA LP (the Manager)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Manager and Fiera Capital Corporation (the Purchaser and together with the Manager, the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for (i) an approval with respect to a proposed change of control of the Manager pursuant to subsection 5.5(1)(a.1) of NI 81-102 (the Approval Sought) and (ii) an abridgement of the time period to deliver notice to securityholders of the change of control of the Manager resulting from the Proposed Transaction (defined below) pursuant to subsection 5.8(1)(a) to not less than 30 days (the Abridgement Relief).
Under National Policy 11-203 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 Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut (the Other Jurisdictions and together with Ontario, the Jurisdictions)
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
This decision is based on the following facts represented by the Filers:
The Manager
1. The Manager is a limited partnership established under the laws of Ontario with its head office in Toronto, Ontario. The general partner of the Manager is Natixis Investment Managers Canada Limited (the General Partner), a corporation incorporated under the laws of Ontario.
2. The Manager is registered as an investment fund manager in Ontario, Québec and Newfoundland and Labrador, an exempt market dealer in each of the Jurisdictions and a portfolio manager and mutual fund dealer in Ontario.
3. The Manager is the manager, promoter and portfolio manager of all of the mutual funds identified in Schedule "A" hereto (each a Fund and collectively, the Funds) and the trustee of the Funds formed as trusts. In addition to the Funds, the Manager manages three investment funds which are sold to investors pursuant to exemptions from the prospectus requirement.
4. The Manager is directly and indirectly owned by Natixis Investment Managers Canada Corp. (Natixis Corp). Natixis Corp owns 100% of the issued and outstanding Class A units of the Manager. The General Partner owns 100% of the issued and outstanding Class B units of the Manager and the General Partner is wholly owned by Natixis Corp. Natixis Corp is a wholly owned subsidiary of Natixis Investment Managers, L.P., a Delaware limited partnership (the Vendor).
5. The Manager is not in default of applicable securities legislation in any Jurisdiction.
The Funds
6. Each Fund is an open-end trust established under the laws of Ontario or an investment portfolio consisting of certain classes and series of Natixis Investment Managers Canada Capital Corporation (the Fund Corporation), an open-ended mutual fund corporation amalgamated under the laws of Ontario.
7. Each Fund is a reporting issuer in all of the Jurisdictions and subject to NI 81-102. The securities of each Fund are qualified for distribution pursuant to a simplified prospectus, fund facts and annual information form that have been prepared and filed in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure, subject to any exemptions therefrom.
8. None of the Funds is in default of applicable securities legislation in any Jurisdiction.
The Purchaser
9. The Purchaser is a corporation established under the laws of Ontario with its head office in Montréal, Québec and its registered office in Toronto, Ontario.
10. The Purchaser's primary business is to act as portfolio manager in respect of institutional, retail and private wealth clients. It also acts as manager of a number of investment funds which are sold to investors pursuant to exemptions from the prospectus requirement, and acts as manager of certain closed-end funds and an alternative mutual fund.
11. The Purchaser is registered as an investment fund manager in Ontario, Québec and Newfoundland and Labrador, an exempt market dealer and portfolio manager in each of the Jurisdictions, a commodity trading manager in Ontario, a derivatives portfolio manager in Québec and as commodity futures advisor in Manitoba.
12. The Purchaser is a publicly held corporation. The shareholders holding securities representing at least 10% of the issued and outstanding securities of the Purchaser (each, a Major Direct Shareholder) include Fiera Capital L.P., which owns approximately 26.11% of the outstanding voting shares of the Purchaser, and National Bank of Canada, which, through its wholly owned subsidiary Natcan Investment Management Inc., owns approximately 17.61% of the outstanding voting shares of the Purchaser, as at May 5, 2019.
13. Mr. Jean-Guy Desjardins, the Chief Executive Officer of the Purchaser, indirectly owns approximately 28% of the outstanding voting interest of Fiera Capital L.P., and Desjardins Financial Holding Inc. (DFH), a direct wholly-owned subsidiary of Fédération des caisses Desjardins du Québec (FCD), owns 28.3% of the outstanding voting interest of Fiera Capital L.P, as at May 5, 2019. DFH proposed for election two of the current eight directors of the Purchaser that the holders of Class B Special Voting Shares are entitled to appoint.
14. Mr. Desjardins is in a position to exercise significant control over matters of the Purchaser requiring shareholder approval, including the election of directors and the determination of significant corporate actions. In addition, Jean-Guy Desjardins owns, as at May 5, 2019, directly or indirectly approximately 9.4% of the outstanding voting shares of the Purchaser and has the right to appoint or elect six of the eight directors of the Purchaser that the holders of the Class B Special Voting Shares of the Purchaser can appoint.
15. The Purchaser is not in default of applicable securities legislation in any Jurisdiction.
The Proposed Transaction
16. The Vendor and the Purchaser have entered into a share purchase agreement (the SPA) pursuant to which the Purchaser will acquire 100% of the issued and outstanding shares of Natixis Corp (the Proposed Transaction) for consideration payable in cash at the Closing (as defined below). Natixis Corp owns, directly and indirectly, 100% of the issued and outstanding units of the Manager.
17. Concurrently with, or shortly after, the public announcement of the Proposed Transaction, Natixis Investment Managers Canada Holdings Ltd (Gestionnaires De Placements Natixis Canada Holding Ltée), an indirectly owned subsidiary of Natixis Investment Managers S.A., purchased an interest in the capital of the Purchaser, corresponding to approximately 10.8% of the outstanding voting shares of the Purchaser (the Fiera Capital Interest Acquisition).
18. In connection with the Fiera Capital Interest Acquisition as well as the Proposed Transaction, an application pursuant to section 11.9(1) (a) of National Instrument 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) was filed with the Autorité des marchés financiers and the Ontario Securities Commission on March 18, 2019 and non-objection letters were issued by both regulators on April 25, 2019.
19. Completion of the Proposed Transaction is subject to customary closing conditions, including the Approval Sought. Assuming timely receipt of all necessary regulatory non-objections/approvals and the satisfaction of all other conditions, the closing of the Proposed Transaction is expected to occur on or about July 2, 2019, or on such other later date when all of the conditions precedent have been satisfied or waived, and all approvals have been obtained, subject to extension by the parties (the Closing). If completed as contemplated, upon Closing, the Purchaser will indirectly own 100% of the issued and outstanding units of the Manager.
20. Further to the public announcement of the Proposed Transaction on May 9, 2019, a material change report as well as amendments to the Funds' current simplified prospectus, annual information form and related fund facts documents announcing the Proposed Transaction were filed on SEDAR on May 17, 2019 in accordance with applicable securities legislation.
Proposed Change of Control of Manager
21. As the ownership of the Manager will change such that upon Closing, the Purchaser will indirectly own 100% of the issued and outstanding units of the Manager, the Proposed Transaction will result in a change of control of the Manager. Accordingly, regulatory approval is required pursuant to section 5.5(1)(a.1) of NI 81-102.
Impact on the Manager and the Funds
22. Upon Closing, the Purchaser will become the indirect parent of the Manager.
23. There are no plans to change the role of the Manager as investment fund manager of the Funds. The Purchaser wishes to continue to operate the business of the Manager relating to the Funds as a subsidiary of the Purchaser acting as a distinct, stand-alone business.
24. The Purchaser does not intend to move the head office of the Manager out of Toronto, Ontario for at least the foreseeable period of approximately twelve months following Closing.
25. It is anticipated that, upon Closing, Mr. Abhishek Goenka, the current Chief Executive Officer, Ultimate Designated Person and Chief Financial Officer of the General Partner, Ms. Angela Nikolakakos, the current General Counsel, Secretary and Chief Compliance Officer of the General Partner, and Mr. Steve Gurajada, the current VP Operations and Corporate Controller of the General Partner, will remain in those senior management roles with the General Partner, and Mr. Roland Sakha will become Managing Director of the General Partner and Mr. Dominic Grimard will become VP, Finance.
26. It is also anticipated that, upon Closing, Mr. Goenka and Ms. Nikolakakos will continue to act as directors of the General Partner, while Mr. Sakha, Mr. Ted Ecclestone, Mr. Grimard and Mr. Jean-Philippe Lemay will be added as directors of the General Partner, with Mr. Lemay serving as Chair of the board of directors of the General Partner.
27. The Purchaser intends to maintain the Manager as a distinct, stand-alone legal entity and, for at least the foreseeable period of approximately twelve months following Closing, has no current intention to:
(a) make any substantive changes as to how the Manager operates or manages the daily operation of the Funds;
(b) amalgamate or merge the Manager with the Purchaser or any other investment fund manager; or
(c) immediately following the Proposed Transaction, or within a foreseeable period of time, change the Manager, as investment fund manager of the Funds, to the Purchaser or another investment fund manager.
28. Should the Purchaser take any action identified in paragraph 27 above within the foreseeable period of approximately twelve months following Closing, then it will obtain the approval of the securityholders of the Funds.
29. Other than the material change triggered by the change of control of the Manager, any portfolio management change resulting from the process described in paragraph 34 below or any material change resulting from the Manager acting in accordance with its fiduciary obligation to the Funds, completion of the Proposed Transaction is not expected to result in any material change to, or impact on, the business, operations or affairs of the Funds, the securityholders of the Funds or the Manager.
30. The Purchaser has no current intention to:
(a) change the investment objectives of the Funds;
(b) increase the management fees or operating expenses paid by the Funds;
(c) merge the Funds;
(d) change any of the directors or officers involved in any of the day-to-day business, operations or affairs of the General Partner or the Funds, except as discussed above;
(e) make changes to fund accounting and other administrative functions undertaken by the current providers, both internal and external to the Manager or the Funds; or
(f) change the custodian of the Funds.
31. Following Closing, the name of the Manager will be changed to Fiera Investments LP and the names of the Funds will change to remove the term "Natixis", where applicable, and to add the term "Fiera". These name changes are necessary as: (i) the Manager will cease to be a part of the Natixis group of companies on Closing and it will no longer have the rights to use the Natixis name, and thus it would be misleading to suggest that it remains part of the Natixis group of companies by continuing to use the Natixis name; and (ii) the Manager does not have a name independent from Natixis under which it and the Funds may continue to operate following Closing.
32. The members of the Independent Review Committee (IRC) of the Funds will cease to be IRC members by operation of section 3.10(1)(c) of National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107). However, it is currently intended that immediately following the completion of the Proposed Transaction, the same members of the IRC will be re-appointed by the Manager, subject to such members being "independent" as defined in NI 81-107 at that time.
33. No final decisions have been made as to any duplication of systems between the Purchaser and the Manager, but some streamlining of such systems can be expected in due course. There is no current intention to merge or integrate the business operations of the Manager into the Purchaser.
34. Following the Closing, and as part of the Manager's fiduciary obligation to the Funds to optimize investment performance, the management team of the Manager will evaluate opportunities to enhance the quality of portfolio management and may decide to change certain portfolio managers and strategies, consistent with the Manager's right to change portfolio managers and strategies for the Funds today.
35. To the extent that any related party issues arise following the Proposed Transaction, in particular if, in the future, the Manager wishes to appoint a service provider to a Fund that is an affiliate of the Purchaser, the Manager will establish written policies and procedures to address the conflict of interest matter and will refer such policies and procedures to the IRC for its review and input, in accordance with its obligations under NI 81-107.
36. The Proposed Transaction is not expected to adversely impact the financial stability of the Manager or its ability to fulfill its regulatory obligations in respect of the Funds.
37. The Proposed Transaction will not have any impact on the securityholders' interest in the Funds and securityholders are not required to take any action.
Notice Requirement
38. Written notice (the Notice) regarding the Proposed Transaction was sent to each securityholder of the Funds, as required by section 5.8(1) of NI 81-102, on May 24, 2019, being at least 30 days before the Closing.
39. It is the Filers' view that it would not be prejudicial to the securityholders of the Funds to abridge the notice period required under s. 5.8(1)(a) of NI 81-102 from 60 days to not less than 30 days for the following reasons:
(a) while the Proposed Transaction is pending, but not closed, there is uncertainty among clients and others regarding the Manager. It is strongly preferable to close the Proposed Transaction promptly with an abridgement to the 60-day notice period and minimize the period of uncertainty;
(b) the securityholders of the Funds are sufficiently aware of the Proposed Transaction;
(c) other than the material changes described above in paragraph 28, the Proposed Transaction is not expected to result in any material change in how the Manager administers or manages the Funds;
(d) the Proposed Transaction will not have any impact on the securityholders' interest in the Funds and securityholders are not required to take any action; securityholders need only consider whether they wish to dispose of their securities of the Funds. The change of control of the Manager, by itself, will not trigger any other material change to the Funds; and
(e) the Funds calculate and publish their net asset value per security on a daily basis and permit redemptions of securities of the Funds on a daily basis, allowing securityholders of Funds to immediately redeem their securities upon receipt of the Notice if they so choose.
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:
(a) the Approval Sought is granted; and
(b) the Abridgement Relief is granted, provided that:
(i) the Notice is given to securityholders of the Funds at least 30 days before the Closing; and
(ii) no material changes will be made to the management, operations or portfolio management of the Funds for at least 60 days following the date the Notice was delivered.
Schedule "A"
FUNDS
Single Trust Funds:
Natixis Canadian Bond Fund
Loomis Sayles Global Diversified Corporate Bond Fund
Loomis Sayles Strategic Monthly Income Fund
Gateway Low Volatility U.S. Equity Fund
Registered Funds:
Natixis Strategic Balanced Registered Fund
Natixis Intrinsic Balanced Registered Fund
Natixis Canadian Dividend Registered Fund
Natixis Intrinsic Growth Registered Fund
Natixis U.S. Dividend Plus Registered Fund
Natixis U.S. Growth Registered Fund
Natixis Global Equity Registered Fund
Natixis Canadian Preferred Share Registered Fund
Oakmark Natixis Registered Fund
Oakmark International Natixis Registered Fund
Class Funds:
Natixis Canadian Bond Class{*}
Loomis Sayles Global Diversified Corporate Bond Class{*}
Natixis Strategic Balanced Class{*}
Natixis Intrinsic Balanced Class{*}
Natixis Canadian Dividend Class{*}
Natixis Intrinsic Growth Class{*}
Natixis U.S. Dividend Plus Class{*}
Natixis U.S. Growth Class{*}
Natixis Global Equity Class{*}
Natixis Canadian Preferred Share Class{*}
Oakmark Natixis Class{*}
Oakmark International Natixis Class{*}
{*} An investment portfolio consisting of certain classes and series of Natixis Investment Managers Canada Capital Corporation.