Ontario Teachers' Pension Plan Board and LLX Logistica S.A.
Headnote
Subsection 74(1) -- Application for exemption from prospectus requirement in connection with first trade of shares of issuer through exchange or market outside of Canada or to person or company outside of Canada -- issuer not a reporting issuer in any jurisdiction in Canada -- conditions of the exemption in section 2.14 of National Instrument 45-102 Resale of Securities not satisfied as residents of Canada (including Applicant) own more than 10% of the total number of shares -- relief restricted to securities acquired prior to date of decision -- relief granted subject to conditions, including condition that residents of Canada, excluding the Applicant, do not hold more than 10 percent of the outstanding securities or represent more than 10 percent of the number of securityholders and condition that the first trade be made through an exchange or market outside of Canada or to a person or company outside of Canada
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).
National Instrument 45-102 Resale of Securities, s. 2.14.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
AND
IN THE MATTER OF
ONTARIO TEACHERS' PENSION PLAN BOARD
AND
LLX LOGISTICA S.A.
ORDER
Background
The principal securities regulator (the Decision Maker) in Ontario (the Jurisdiction) has received an application from the Ontario Teachers' Pension Plan Board (the Applicant) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption under section 74(1) of the Legislation from the prospectus requirements contained at section 53 of the Legislation in connection with the first trades of Common Shares (as defined below) in LLX Logistica S.A. (LLX) acquired by the Applicant prior to the date of the decision (the Requested Relief).
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 facts represented by the Applicant:
1. The Applicant is an independent corporation established on December 31, 1989 by the Teachers' Pension Act (Ontario) to administer and manage a pension plan established for the benefit of the Province of Ontario's primary and secondary school teachers and to pay members of the pension plan their respective benefits under the plan. The head office of the Applicant is located at 5650 Yonge Street, Toronto, Ontario, Canada.
2. LLX is a corporation incorporated, existing and in good standing under the laws of Brazil, with shares listed on the Novo Mercado of the São Paulo Stock Exchange (the Bovespa). LLX also has a global depositary receipt (GDR) program administered by The Bank of New York Mellon as depositary bank. Each GDR represents one LLX Common Share. The LLX GDRs trade on the over-the-counter market.
3. LLX is in the business of providing Brazil with logistics skills and infrastructure, particularly in the port sector, through two large-capacity private port terminals. The head office of LLX is located at Praia do Flamengo, No. 66, 13th floor, Rio de Janeiro, Brazil.
4. On January 17, 2008, the Applicant purchased 905,530 nominative preferred shares (the Preferred Shares) from LLX. After giving effect to this purchase, the share capital of LLX consisted of R$2,185,093,333, divided into 6,023,531 shares of which 903,530 Preferred Shares and 5,120,001 other shares were outstanding. The shares were sold to the Applicant in a private placement transaction in which the Applicant qualified as an accredited investor in reliance on the registration and prospectus exemptions contained in National Instrument 45-106 Prospectus and Registration Exemptions.
5. On June 19, 2008, the Preferred Shares were converted to common shares (Common Shares). On the same date, the Common Shares were split at a rate of 59.4940978 to 1 (the Conversion and Split). The Conversion and Split resulted in a capital base of R$5,129,036.30, divided into 358,364,542 Common Shares, which were distributed to shareholders in proportion to the ownership interest each of them held before the Conversion and Split, resulting in the Applicant owning 53,754,702 Common Shares. On July 28, 2008, after LLX's spin off from MMX Mineracao e Metallicos S.A. (MMX), LLX's shares began to be traded in the New Market segment of the Bovespa. As part of this transaction, the Applicant received a distribution of 15,192,000 shares of LLX (Distribution), which was in proportion to the Applicant's 5% ownership interest in MMX.
6. To the best of the Applicant's knowledge, based on a Certificate from LLX, on March 16, 2009, the Board of Directors of LLX approved an increase of LLX's capital stock by means of the issuance of 333,333,335 new Common Shares of LLX (Capital Increase), resulting in a capital base of R$675,227,907.30 divided into 691,869,077 Common Shares. Such Capital Increase has been ratified by the Board of Directors of LLX on May 28, 2009. 0.3% of these Common Shares are represented by GDRs.
7. Immediately following the Conversion and Split, Distribution and Capital Increase, the Applicant held 113,713,982 Common Shares, representing approximately 16.4357% of the total number of issued and outstanding Common Shares. On August 28, 2009, the Applicant purchased an additional 10,405,324 Common Shares of LLX from another shareholder in a secondary market trade. As such, the Applicant currently holds 17.9397% or 124,119,306 of the total number of issued and outstanding Common Shares. The Applicant has not held, and does not currently hold, any GDRs.
8. Canadian resident investors, other than the Applicant, currently hold less than 0.00005% of the total number of outstanding Common Shares, and less than 2.3% of the total number of outstanding GDRs. Including the Applicant, Canadian resident investors currently hold approximately 17.9398% of the total number of outstanding Common Shares, and less than 2.3% of the total number of outstanding GDRs.
9. Canadian-resident investors, other than the Applicant, currently represent less than 0.00005% of the total number of holders of Common Shares, and less than 2.3% of the total number of holders of GDRs. Including the Applicant, Canadian-resident investors currently represent approximately 0.00005% of the total number of holders of Common Shares, and less than 2.3% of the total number of holders of GDRs.
10. LLX is not a reporting issuer or its equivalent in the Province of Ontario or any other province or territory of Canada, nor are any of its securities listed or posted for trading on any exchange, or market, located in Canada. LLX has no present intention of becoming listed in Canada or of becoming a reporting issuer under the Act or under any other Canadian securities laws, and no market for the Common Shares exists in Canada and none is expected to develop.
11. In the absence of the exemption requested hereby, the first trade of Common Shares held by the Applicant will be deemed to be a distribution and subject to section 53 of the Act.
12. The prospectus exemptions in sections 2.5 and 2.6 of National Instrument 45-102 Resale of Securities (NI 45-102) will not be applicable in this situation because LLX is not a reporting issuer or its equivalent in the Province of Ontario or any other province or territory of Canada.
13. The prospectus exemption in section 2.14 of NI 45-102 would be applicable in this situation, but will not be available to the Applicant (or any other holder of Common Shares in Canada) with respect to its first trade of Common Shares because residents of Canada, including the Applicant, currently own more than 10% of the outstanding Common Shares.
Decision
This Order evidences the decision of the Decision Maker (the Decision).
The Decision Maker 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 Maker under the Legislation is that the Requested Relief is granted provided that:
i) at the date of the trade, LLX is not a reporting issuer in any jurisdiction of Canada where that concept exists;
ii) the trade is executed through the facilities of the Bovespa or any other exchange or market outside Canada or to a person or company outside of Canada; and
iii) at the distribution date of such shares, after giving effect to the issue of the shares and any other shares of the same class or series that were issued at the same time as or as part of the same distribution as the shares, residents of Canada (excluding the Applicant):
a. did not own directly or indirectly more than 10 percent of the outstanding shares of the class or series, and
b. did not represent in number more than 10 percent of the total number of owners directly or indirectly of shares of the class or series.
DATED at Toronto this 13th day of November, 2009