Onex Corporation

Decision

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Issuer bid – Modified Dutch auction – Application for relief from the requirement to take up and pay for shares on a pro rata basis and the related disclosure requirements for the issuer bid circular (section 2.26 of National Instrument 62-104 Take-Over Bids and Issuer Bids and item 8 of Form 62-104F2) – Application for relief from the requirement to take up all securities deposited under the issuer bid and not withdrawn if all the terms and conditions of the Offer have been complied with or waived unless and the Offer is under subscribed (subsection 2.32(4) of National Instrument 62-104 Take-Over Bids and Issuer Bids) – requested relief granted, subject to conditions.

Applicable Legislative Provisions

National Instrument 62-104 Take-Over Bids and Issuer Bids, ss. 2.26, 2.32(4) and 6.1 and item 8 of Form 62-104F2.

December 6, 2024

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
ONEX CORPORATION
(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) that, in connection with the proposed purchase by the Filer of a portion of its issued and outstanding subordinate voting shares (the Subordinate Voting Shares) pursuant to an issuer bid commenced on November 8, 2024 (the Offer), the Filer be exempt from the following requirements:

  1. the requirement in section 2.26 of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104) to take-up and pay for the Subordinate Voting Shares deposited pursuant to the Offer proportionately according to the number of Subordinate Voting Shares deposited by each holder (the Proportionate Take-Up Requirement);
  2. the requirement in Item 8 of Form 62-104F2 Issuer Bid Circular to provide disclosure of the proportionate take-up and payment mechanism in the issuer bid circular in respect of the Offer (the Circular) (the Proportionate Take-Up Disclosure Requirement); and
  3. the requirement in subsection 2.32(4) of NI 62-104 that the Offer not be extended if all the terms and conditions of the Offer have been complied with or waived unless the Filer first takes up all of the Subordinate Voting Shares deposited under the Offer and not withdrawn (the Extension Take-Up Requirement, and together with the Proportionate Take-Up Requirement and the Proportionate Take-Up Disclosure Requirement, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

  1. the Ontario Securities Commission is the principal regulator for this application; and
  2. the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, the Northwest Territories, Nunavut and the Yukon Territory.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102, and NI 62-104 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:

  1. The Filer is a corporation validly existing under the Business Corporations Act (Ontario) and is in good standing and has its head office and registered office in Toronto, Ontario.
  2. The Filer is a reporting issuer in each jurisdiction of Canada and is not in default of any requirement of the securities legislation in any jurisdiction in which it is a reporting issuer.
  3. The authorized share capital of the Filer consists of: (i) an unlimited number of senior preferred shares; (ii) an unlimited number of junior preferred shares; (iii) 100,000 multiple voting shares (the Multiple Voting Shares); and (iv) an unlimited number of Subordinate Voting Shares. As at November 7, 2024, the date prior to the announcement of the Filer’s intention to proceed with the Offer, 100,000 Multiple Voting Shares and 73,968,434 Subordinate Voting Shares were issued and outstanding. No senior preferred shares or junior preferred shares are issued and outstanding.
  4. The 100,000 Multiple Voting Shares carry such number of votes in the aggregate as represents 60% of the aggregate votes attached to all shares of the Filer carrying voting rights. The Subordinate Voting Shares carry one (1) vote per share and as a class are entitled to 40% of the aggregate votes attached to all shares of the Filer carrying voting rights.
  5. The Subordinate Voting Shares are listed for trading on the Toronto Stock Exchange (the TSX) under the symbol “ONEX”. The closing price of the Subordinate Voting Shares on the TSX on November 7, 2024 was $108.75.
  6. The board of directors of the Filer (the Board) has determined that the Offer is in the best interests of the Filer and the holders of Subordinate Voting Shares (each, a Shareholder and collectively, the Shareholders) and that the Offer is a prudent use of the Filer’s financial resources. The Filer and the Board believe that the Offer represents an equitable and efficient means for the Filer to distribute up to $400,000,000 of capital to Shareholders who elect to tender, while at the same time proportionately increasing the equity interest in the Filer of Shareholders who do not deposit their Subordinate Voting Shares to the Offer.
  7. The Offer does not apply to Multiple Voting Shares and no offer is being made for the Multiple Voting Shares. The Offer is made only for Subordinate Voting Shares and is not made for any options to purchase Subordinate Voting Shares or any other securities of the Filer that are convertible into or exchangeable or exercisable for Subordinate Voting Shares, unless such options and/or such other securities were validly converted, exchanged or exercised in advance of the Expiry Time (as defined below).
  8. The Filer formally commenced the Offer on November 8, 2024. The Circular specifies that the Filer proposes to purchase, by way of a modified “Dutch auction” procedure in the manner described below, that number of Subordinate Voting Shares having an aggregate purchase price of up to $400,000,000 (the Specified Maximum Dollar Amount) at a purchase price of not less than $105.00and not more than $112.00per Subordinate Voting Share (the Price Range).
  9. The Filer will fund the purchase of Subordinate Voting Shares pursuant to the Offer, together with the fees and expenses of the Offer, with cash on hand. The Offer is not conditional upon the receipt of any financing.
  10. Any Shareholder wishing to tender to the Offer will be able to do so in the following ways:
    1. by making auction tenders in which the tendering Shareholders specify the number of Subordinate Voting Shares being tendered at a specified price per Subordinate Voting Share (the Auction Price) within the Price Range in increments of $0.25 (the Auction Tenders);
    2. by making purchase price tenders in which the tendering Shareholders do not specify a price per Subordinate Voting Share, but rather agree to have a specified number of Subordinate Voting Shares purchased at the Purchase Price (as defined below) to be determined pursuant to the Offer (the Purchase Price Tenders);
    3. by making proportionate tenders in which the tendering Shareholders agree to sell to the Filer, at the Purchase Price to be determined pursuant to the Offer, a number of Subordinate Voting Shares that will result in them maintaining their respective proportionate Subordinate Voting Share ownership in the Filer following completion of the Offer (the Proportionate Tenders).
  11. Shareholders who tender Subordinate Voting Shares without making a valid Auction Tender, Purchase Price Tender or Proportionate Tender will be deemed to have made a Purchase Price Tender.
  12. Shareholders may make multiple Auction Tenders but not in respect of the same Subordinate Voting Shares (i.e. Shareholders may tender different Subordinate Voting Shares at different prices but cannot tender the same Subordinate Voting Shares at different prices). Shareholders may also make an Auction Tender in respect of certain of their Subordinate Voting Shares and a Purchase Price Tender in respect of other Subordinate Voting Shares. Shareholders who make an Auction Tender or a Purchase Price Tender may not make a Proportionate Tender and Shareholders who make a Proportionate Tender may not make an Auction Tender or a Purchase Price Tender.
  13. A registered Shareholder who makes a Proportionate Tender must deposit either all of its Subordinate Voting Shares or a sufficient number of Subordinate Voting Shares to satisfy the Shareholder’s Proportionate Tender. A non-registered Shareholder who wishes its nominee to make a Proportionate Tender must deposit all of its Subordinate Voting Shares.
  14. Any Shareholder who beneficially owns fewer than 100 Subordinate Voting Shares and tenders all of such Shareholder’s Subordinate Voting Shares pursuant to an Auction Tender at or below the Purchase Price or pursuant to a Purchase Price Tender will be considered to have made an “Odd-Lot Tender”.
  15. The Filer will determine a single purchase price payable per Subordinate Voting Share (the Purchase Price) based on the Auction Prices and the number of Subordinate Voting Shares deposited pursuant to valid Auction Tenders and Purchase Price Tenders. The Purchase Price will be the lowest price that enables the Filer to purchase that number of Subordinate Voting Shares tendered pursuant to valid Auction Tenders and Purchase Price Tenders having an aggregate purchase price not to exceed an amount (the Auction Tender Limit Amount) equal to
    1. the Specified Maximum Dollar Amount, less
    2. the product of
      1. the Specified Maximum Dollar Amount, and
      2. a fraction, the numerator of which is the aggregate number of Subordinate Voting Shares owned by Shareholders making valid Proportionate Tenders, and the denominator of which is the aggregate number of Subordinate Voting Shares outstanding at the time of expiry of the Offer.
  16. For the purpose of determining the Purchase Price, Subordinate Voting Shares deposited pursuant to a Purchase Price Tender will be deemed to have been tendered at the minimum price of $105.00 per Subordinate Voting Share.
  17. If the aggregate purchase price for Subordinate Voting Shares validly tendered pursuant to (i) Auction Tenders at Auction Prices at or below the Purchase Price, and (ii) Purchase Price Tenders, is less than or equal to the Auction Tender Limit Amount, the Filer will purchase at the Purchase Price all Subordinate Voting Shares so deposited pursuant to Auction Tenders at or below the Purchase Price and Purchase Price Tenders.
  18. If the aggregate purchase price for Subordinate Voting Shares validly tendered pursuant to (i) Auction Tenders at Auction Prices at or below the Purchase Price, and (ii) Purchase Price Tenders, is greater than the Auction Tender Limit Amount, the Filer will purchase at the Purchase Price a portion of the Subordinate Voting Shares so deposited pursuant to Auction Tenders at or below the Purchase Price and Purchase Price Tenders, determined as follows:
    1. first, the Filer will purchase all such Subordinate Voting Shares tendered by Shareholders at or below the Purchase Price pursuant to Odd- Lot Tenders;
    2. second, the Filer will purchase on a pro rata basis that portion of such Subordinate Voting Shares tendered pursuant to Auction Tenders at or below the Purchase Price and Purchase Price Tenders having an aggregate purchase price, based on the Purchase Price, equal to
      1. the Auction Tender Limit Amount, less
      2. the aggregate amount paid by the Filer for Subordinate Voting Shares tendered pursuant to Odd-Lot Tenders.
  19. The Filer will purchase at the Purchase Price that portion of the Subordinate Voting Shares deposited by Shareholders making valid Proportionate Tenders that results in the tendering Shareholders maintaining their proportionate equity ownership in the Filer following completion of the Offer.
  20. The number of Subordinate Voting Shares that the Filer will purchase pursuant to the Offer and the aggregate purchase price will vary depending on whether the aggregate purchase price payable in respect of Subordinate Voting Shares required to be purchased pursuant to Auction Tenders at Auction Prices at or below the Purchase Price and Purchase Price Tenders (the Auction Tender Purchase Amount) is equal to or less than the Auction Tender Limit Amount. If the Auction Tender Purchase Amount is equal to the Auction Tender Limit Amount, the Filer will purchase Subordinate Voting Shares for an aggregate purchase price equal to the Specified Maximum Dollar Amount. If the Auction Tender Purchase Amount is less than the Auction Tender Limit Amount, the Filer will purchase proportionately fewer Subordinate Voting Shares in the aggregate, with a proportionately lower aggregate purchase price.
  21. If the Purchase Price is determined to be $105.00 (being the minimum Purchase Price under the Offer), the maximum number of Subordinate Voting Shares that the Filer is offering to purchase pursuant to the Offer is 3,809,532 Subordinate Voting Shares representing approximately 5.15% of the outstanding Subordinate Voting Shares. If the Purchase Price is determined to be $112.00 (being the maximum Purchase Price under the Offer), the maximum number of Subordinate Voting Shares that the Filer is offering to purchase pursuant to the Offer is 3,571,428 Subordinate Voting Shares representing approximately 4.83% of the outstanding Subordinate Voting Shares.
  22. All Subordinate Voting Shares purchased by the Filer pursuant to the Offer (including Subordinate Voting Shares tendered at Auction Prices below the Purchase Price) will be purchased at the Purchase Price. Shareholders will receive the Purchase Price in cash. All Auction Tenders, Purchase Price Tenders and Proportionate Tenders will be subject to adjustment to avoid the purchase of fractional Subordinate Voting Shares. All payments to Shareholders will be subject to deduction of applicable withholding taxes.
  23. Subordinate Voting Shares validly deposited by a Shareholder pursuant to an Auction Tender will not be purchased by the Filer pursuant to the Offer if the Auction Price per Subordinate Voting Share specified by the Shareholder is greater than the Purchase Price.
  24. All Subordinate Voting Shares tendered to the Offer and not taken up will be returned to the appropriate Shareholders.
  25. Shareholders who do not accept the Offer will continue to hold the same number of Subordinate Voting Shares as before the Offer and their proportionate Share ownership will increase following completion of the Offer.
  26. Mr. Gerald W. Schwartz, the Founder and Chairman of the Filer, who beneficially owns, controls or directs as at November 7, 2024, directly or indirectly, 8,364,140 Subordinate Voting Shares representing approximately 11.308% of the issued and outstanding Subordinate Voting Shares, has advised the Filer that he intends to participate in the Offer by making a Proportionate Tender in order to maintain his proportionate ownership interest in Subordinate Voting Shares.
  27. To the knowledge of the Filer and its directors and officers, after reasonable inquiry, as of November 8, 2024, other than Mr. Gerald W. Schwartz:
    1. no person or company beneficially owns, or exercises control or direction over, more than 10% of the voting rights attached to all of the Filer’s outstanding voting securities; and
    2. no director or officer of the Filer, no associate or affiliate of the Filer or of an insider of the Filer, no insider of the Filer (other than a director or officer), and no person or company acting jointly or in concert with the Filer, has indicated any present intention to deposit any of such person’s Subordinate Voting Shares pursuant to the Offer.
  28. The Offer is scheduled to expire at 11:59 p.m. (Toronto time) on December 13, 2024 (the Expiry Time).
  29. Until expiry of the Offer, all information about the number of Subordinate Voting Shares tendered and the prices at which such Subordinate Voting Shares are tendered will be required to be kept confidential by the depositary and the Filer until the Purchase Price has been determined.
  30. If all the terms and conditions of the Offer have been complied with or waived by the Filer by the Expiry Time but the aggregate purchase price of the Subordinate Voting Shares validly tendered pursuant to Auction Tenders and Purchase Price Tenders is less than the Auction Tender Limit Amount, the Filer may wish to extend the Offer. The Filer will not extend the Offer if all the terms and conditions of the Offer have been complied with or waived by the Filer by the Expiry Time and the aggregate purchase price of the Subordinate Voting Shares validly tendered and not withdrawn pursuant to Auction Tenders and Purchase Price Tenders is equal to or greater than the Auction Tender Limit Amount.
  31. Under the Extension Take-Up Requirement contained in subsection 2.32(4) of NI 62-104, an offeror may not extend an issuer bid if all the terms and conditions of the issuer bid have been complied with or waived unless the offeror first takes up all the securities deposited and not withdrawn under the issuer bid.
  32. As the determination of the Purchase Price requires that all Auction Prices and the number of Subordinate Voting Shares deposited pursuant to both Auction Tenders and Purchase Price Tenders be known and taken into account, the Filer will be unable to take up the Subordinate Voting Shares deposited and not withdrawn under the Offer as of the Expiry Time prior to extending the Offer because the Purchase Price will not and cannot be known as additional Auction Tenders and Purchase Price Tenders may be made during the extension period that will impact the calculation of the Purchase Price. As such, relief from the Extension Take-Up Requirement is required in connection with an extension of the Offer to enable the Filer to make a final determination regarding the Purchase Price, taking into account all Subordinate Voting Shares tendered prior to the Expiry Time and those tendered during any extension period.
  33. Subordinate Voting Shares deposited pursuant to the Offer, including those deposited prior to the Expiry Time, may be withdrawn by the Shareholder at any time prior to the expiration of any extension period in respect of the Offer.
  34. The Filer is relying on the exemption from the formal valuation requirements applicable to issuer bids under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) set out in paragraph 3.4(b) of MI 61-101 (the Liquid Market Exemption).
  35. There is a “liquid market” for the Subordinate Voting Shares, as such term is defined in MI 61-101, as of the date the Offer was publicly announced because, in accordance with section 1.2 of MI 61-101:
    1. there is a published market for the Subordinate Voting Shares (being the TSX);
    2. during the 12-month period before November 8, 2024 (the date the Offer was publicly announced):
      1. the number of issued and outstanding Subordinate Voting Shares was at all times at least 5,000,000 (excluding Subordinate Voting Shares beneficially owned, or over which control or direction was exercised, by related parties), all of which Subordinate Voting Shares are freely tradeable;
      2. the aggregate trading volume of Subordinate Voting Shares on the TSX was at least 1,000,000 Subordinate Voting Shares;
      3. there were at least 1,000 trades in the Subordinate Voting Shares on the TSX; and
      4. the aggregate value of the trades in the Subordinate Voting Shares on the TSX was at least $15,000,000; and
    3. the market value of the Subordinate Voting Shares on the TSX, as determined in accordance with MI 61-101, was at least $75,000,000 for October 2024 (the calendar month preceding the calendar month in which the Offer was publicly announced).
  36. In addition, the Filer has voluntarily obtained a liquidity opinion (the Liquidity Opinion) in accordance with section 1.2 of MI 61-101 from RBC Capital Markets confirming that, based on and subject to customary qualifications, assumptions and restrictions set out therein, (i) a liquid market for the Subordinate Voting Shares exists and (ii) it is reasonable to conclude that, following the completion of the Offer, there will be a market for holders of Subordinate Voting Shares who do not tender to the Offer that is not materially less liquid than the market that existed at the time of the making of the Offer. A copy of the Liquidity Opinion is attached to the Circular.
  37. Based on the maximum number of Subordinate Voting Shares that may be purchased under the Offer and the Liquidity Opinion, the Board has determined that it is reasonable to conclude that, following the completion of the Offer in accordance with its terms, there will be a market for holders of the Subordinate Voting Shares who do not tender to the Offer that is not materially less “liquid” (as such term is defined in MI 61-101) than the market that existed at the time of the making of the Offer.
  38. The Filer has disclosed in the Circular relating to the Offer the following information:
    1. the mechanics for the take-up of and payment for Subordinate Voting Shares as described herein;
    2. that, by tendering Subordinate Voting Shares at the lowest price in the Price Range under an Auction Tender or by tendering Subordinate Voting Shares under a Purchase Price Tender or a Proportionate Tender, a Shareholder can reasonably expect that the Subordinate Voting Shares so tendered will be purchased at the Purchase Price, subject to proration and other terms of the Offer as specified herein;
    3. that the Filer has applied for the Exemption Sought;
    4. the manner in which an extension of the Offer will be communicated to Shareholders and the public;
    5. that Subordinate Voting Shares deposited pursuant to the Offer may be withdrawn at any time prior to the expiry of the Offer;
    6. the name of each Shareholder that has advised the Filer that it intends to make a Proportionate Tender;
    7. the facts supporting the Filer’s reliance on the Liquid Market Exemption and provided a copy of the Liquidity Opinion; and
    8. except in respect of the Proportionate Take-Up Disclosure Requirement, the disclosure prescribed by the Legislation for issuer bids.

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 the Filer:

  1. takes up Subordinate Voting Shares validly deposited pursuant to the Offer and not withdrawn and pays for such Subordinate Voting Shares, in each case, in the manner described herein and as set out in the Circular;
  2. is eligible to rely on the Liquid Market Exemption; and
  3. will issue and file a press release announcing receipt of the Exemption Sought promptly, and in any case, no later than one (1) business day following receipt of the Exemption Sought.

“David Mendicino”
Manager, Corporate Finance Division
Ontario Securities Commission