Pendo Acquisition ULC - s. 104(2)(c)
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- issuer acquires all outstanding common shares of target through compulsory acquisition -- target remains reporting issuer -- issuer desires to transfer outstanding common shares to other direct or indirect wholly-owned subsidiaries -- no change in beneficial ownership of common shares -- issuer exempt from take-over bid requirements in connection with share transfers
Applicable Legislative Provisions
Securities Act R.S.O. 1990, c. S.5, as am., ss. 95-100, 104(2)(c).
November 1, 2006
IN THE MATTER OF
THE SECURITIES ACT, R.S.O. 1990,
CHAPTER S.5, AS AMENDED
(the "Act")
AND
IN THE MATTER OF
PENDO ACQUISITION ULC
ORDER
(Subsection 104(2)(c) of the Act)
UPON the application of Pendo Acquisition ULC (the "Applicant") to the Ontario Securities Commission (the "Commission") for an order pursuant to clause 104(2)(c) of the Act exempting the Applicant from the requirements of sections 95 through 100 of the Act, and the related provisions of the regulations set out in the Act (collectively, the "Take-over Bid Rules"), in connection with the Applicant's acquisition (the "Acquisition") from ACS Media Income Fund (the "Fund") of (i) all of the outstanding common shares ("ACS Shares") of ACS Media Canada Inc. and (ii) all the 14% unsecured subordinated promissory notes of ACS (the "ACS Notes") and certain other indebtedness owed by ACS to the Fund (together with the ACS Notes, the "Purchased Notes");
AND UPON considering the Application and the recommendation of the staff of the Commission;
AND UPON the Applicant having represented as follows:
1. The Applicant is an unlimited liability company incorporated under the laws of the Province of Alberta.
2. The Applicant's registered office is at Suite 3300, 421-7th Avenue SW, Calgary, Alberta T2P 4K9.
3. The Applicant is not a reporting issuer or the equivalent in any of the provinces or territories of Canada that recognize such a concept. The Applicant's securities are not listed or quoted for trading on any Canadian stock exchange or market.
4. ACS is a corporation incorporated on February 10, 2003 under the laws of the Province of Ontario. ACS's registered office is located in Toronto, Ontario.
5. ACS's authorized capital consists of an unlimited number of common shares and an unlimited number of preferred shares. As at September 25, 2006 there were 91,876,582 common shares issued and outstanding and no preferred shares issued and outstanding.
6. All of the ACS Shares are owned by the Fund. ACS carries on no independent operations. It acts solely as a funding conduit between the Fund and its operating subsidiary, ACS Media LLC (the "Company"), an Alaska limited liability company whose business consists primarily of the design, publication and distribution of print and electronic advertising directories in Alaska. ACS owns a 99.9% membership interest in the Company.
7. ACS is a reporting issuer in all of the provinces and territories of Canada that recognize such a concept (the "Jurisdictions") and, to the best of our knowledge, information and belief, is not in default of any requirements of securities legislation in any of the jurisdictions in Canada.
8. The ACS Shares are listed, but not posted for trading, on the Toronto Stock Exchange (the "TSX") under the symbol "AYC". There is no published market in respect of the ACS Shares.
9. The Fund is an unincorporated, open-ended, limited purpose trust formed under the laws of the Province of Ontario. The Fund's registered office is located in Toronto, Ontario.
10. The authorized capital of the Fund consists of an unlimited number of units. The initial public offering of 17,500,000 units was made pursuant to a prospectus dated April 29, 2003. As at September 25, 2006 there were 20,000,000 units issued and outstanding (the "Units").
11. The Fund is a reporting issuer or the equivalent in all the Jurisdictions and, to the best of our knowledge, information and belief, is not in default of any requirements of securities legislation in any of the jurisdictions in Canada.
12. The Units are listed and posted for trading on the TSX under the symbol "AYP.UN".
13. The Fund's assets principally consist of the ACS Shares and the Purchased Notes.
14. Through its ownership of the ACS Shares, the Fund indirectly owns a 99.9% economic interest in the Company.
15. The declaration of trust of the Fund (the "Declaration of Trust") contains a redemption in specie feature whereby the holders of the Units (the "Unitholders") have the right to tender their Units to the Fund for redemption, with the redemption price paid by a distribution of a proportionate share of the Fund's assets (the "Redemption Right"), being a proportionate number of ACS Shares and ACS Notes and a pro rata share of any other property held by the Fund (less a pro rata share of any accrued liabilities of the Fund).
16. The Fund, having determined that it was desirable to ensure that there are no significant trading or other restrictions that would be imposed on a Unitholder that exercised its redemption right to obtain ACS Shares, obtained a listing of the ACS Shares on the TSX and received orders from the securities commissions and equivalent regulatory authorities of the Jurisdictions deeming ACS to be a reporting issuer.
17. To date, no Unitholder has exercised the Redemption Right.
18. On September 25, 2006, the Applicant and the Fund entered into a share purchase agreement (the "Share Purchase Agreement") pursuant to which the Applicant agreed to purchase all the ACS Shares and all the Purchased Notes for an aggregate purchase price of CDN $188 million. Pursuant to the Share Purchase Agreement, the Purchaser has also agreed to fund the repayment of approximately US$35 million of the Company's debt upon closing of the Acquisition, and in relation thereto the Purchaser agreed to subscribe for five additional common shares of ACS. On September 25, 2006, the Applicant publicly announced that it had entered into the Share Purchase Agreement.
19. In accordance with its Declaration of Trust, a sale of Trust Assets (as defined in the Declaration of Trust), which would include the ACS Shares and the Purchased Notes, must be approved by the Unitholders. In conjunction with obtaining such approval, the Fund will call a special meeting of Unitholders and prepare an information circular in connection with such meeting in accordance with applicable securities laws. The resolution to approve the sale of the ACS Shares must be approved by Unitholders representing more than 66?% of the Units represented at the meeting. At the meeting of Unitholders, the Fund also intends to conduct other business, including approving amendments to the Declaration of Trust permitting the redemption of Units at the option of the Fund and the dissolution of the Fund following the completion of the Acquisition.
20. The Fund expects to mail the notice of meeting and the accompanying information circular to all Unitholders by approximately October 30, 2006.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest.
IT IS ORDERED pursuant to clause 104(2)(c) that the Take-Over Bid Rules do not apply to the Acquisition.