Pentair plc
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from prospectus requirements to allow company to spin off shares of a new entity to investors by way of distribution in kind -- distribution not covered by legislative exemptions -- company is a public company in the U.S. but is not a reporting issuer in Canada -- company has a de minimis presence in Canada -- following the spin-off, new entity will become independent public company based in the U.S. and will not be a reporting issuer in Canada -- no investment decision required from Canadian shareholders in order to receive shares of the new entity.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).
April 27, 2018
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 PENTAIR PLC (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 (the "Legislation") for an exemption (the "Exemption Sought") from the prospectus requirements contained in the Legislation in connection with the distribution (the "Spin-Off") of the ordinary shares of nVent Electric plc ("nVent"), a newly formed independent company, by way of a dividend in specie to holders ("Filer Shareholders") of ordinary shares of the Filer ("Filer Shares") resident in Canada ("Filer Canadian Shareholders").
Under the 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 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 other provinces and territories of Canada.
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 Filer.
1. The Filer is a corporation incorporated in Ireland with its registered principal office in London, United Kingdom. The Filer is a focused diversified industrial manufacturing company. The Filer is principally engaged in the delivery of a range of industry leading products, services and solutions in its two reporting segments: water and electrical. The Filer's water segment designs, manufactures and services innovative products and solutions to meet filtration, separation, flow and water management challenges in agriculture, aquaculture, foodservice, food and beverage processing, swimming pools, water supply and disposal and a variety of industrial applications. The Filer's electrical segment designs, manufactures, markets, installs and services high performance products and solutions that connect and protect some of the world's most sensitive equipment, buildings, and critical processes.
2. The Filer is not a reporting issuer under the securities laws of any jurisdiction of Canada and, currently, has no intention of becoming a reporting issuer under the securities laws of any jurisdiction of Canada.
3. The authorized capital of the Filer consists of 426,000,0000 Filer Shares. As of February 23, 2018, there were 178,278,499 Filer Shares issued and outstanding.
4. Filer Shares are listed on the New York Stock Exchange (the "NYSE") and trade under the symbol "PNR". Filer Shares are not listed on any Canadian stock exchange and, currently, the Filer has no intention of listing its securities on any Canadian stock exchange.
5. The Filer is subject to the 1934 Act and the rules, regulations and orders promulgated thereunder.
6. Based on a spreadsheet that breaks down the Filer's shareholders by domicile provided by Computershare Trust Company, N.A. (the Filer's transfer agent), as of February 23, 2018, there were 334 registered Filer Canadian Shareholders holding approximately 4,787 Filer Shares, representing approximately 2.1% of the registered holders of Filer Shares worldwide and holdings of approximately 0.003% of the outstanding Filer Shares as of such date. The Filer does not expect these numbers to have materially changed since that date.
7. Based on a "Geographic Analysis" of beneficial holders provided by Broadridge Financial Solutions, Inc. obtained by the Filer, as of March 5, 2018, there were 3,591 beneficial Filer Canadian Shareholders holding approximately 3,233,000 Filer Shares, representing approximately 1.19% of the beneficial holders of Filer Shares worldwide and holdings of approximately 1.84% of the outstanding Filer Shares as of March 5, 2017. The Filer does not expect these numbers to have materially changed since that date.
8. Based on the information above, the number of Filer Canadian Shareholders and the proportion of Filer Shares held by such shareholders is de minimis.
9. The Filer is proposing to spin off its electrical business into a newly formed independent company, nVent, through a series of transactions. The result of these transaction will be that the Filer will transfer all of the shares of nVent Finance S.à r.l., a wholly-owned subsidiary of the Filer that holds the Filer's interests and assets comprising the electrical business, to nVent in consideration for the issuance of nVent Shares to Filer Shareholders on the basis of one nVent Share for each Filer Share.
10. nVent is a corporation incorporated under the laws of Ireland with registered offices in London, United Kingdom. It is currently an independent company that, at the time of the Spin-Off, will hold the Filer's global electrical business.
11. As of the date hereof, all of the issued and outstanding nVent Shares are held beneficially by an Irish corporate services provider, and no other shares or classes of stock of nVent are issued and outstanding.
12. nVent will have no business operations while its shares are held beneficially by an Irish corporate services provider.
13. In connection with these transactions, nVent will acquire by surrender the shares currently held by the Irish corporate services provider for no consideration, following which such shares will be cancelled.
14. Fractional nVent Shares will not be distributed in connection with the Spin-Off. The distribution agent will aggregate the amount of fractional shares that would otherwise have been distributed and will sell such shares into the public market at the then prevailing market prices and distribute the cash proceeds in U.S. Dollars. The distribution agent will distribute such net proceeds ratably to each Filer Shareholder who would otherwise have been entitled to receive a fractional share of nVent. The Filer will pay all brokers' fees and commissions in connection with the sale of such fractional interests.
15. Filer Shareholders will not be required to pay any consideration for the nVent Shares, or to surrender or exchange Filer Shares or take any other action to be entitled to receive their nVent Shares. The Spin-Off will occur automatically and without any investment decision on the part of Filer Shareholders.
16. nVent received conditional listing approval to list the nVent Shares on the NYSE on April 2, 2018.
17. After the completion of the Spin-Off, the Filer will continue to be listed and traded on the NYSE.
18. nVent is not a reporting issuer in any jurisdiction in Canada nor are its securities listed on any stock exchange in Canada. nVent has no intention to become a reporting issuer in any jurisdiction in Canada or to list its securities on any stock exchange in Canada after the completion of the Spin-Off.
19. The Spin-Off will be effected pursuant to a Separation and Distribution Agreement that is to be entered into prior to the Spin-Off by Filer and nVent which is governed pursuant to the laws of the state of New York.
20. Because the Spin-Off will be treated for the purposes of Irish law as the Filer having made a dividend in specie or a non-cash dividend of nVent Shares to Filer Shareholders, no shareholder approval of the proposed transaction is required (or being sought).
21. In connection with the Spin-Off, nVent has filed with the SEC a registration statement on Form 10 (the "Registration Statement") under the 1934 Act detailing the proposed Spin-Off. nVent initially filed the Registration Statement with the SEC on October 30, 2017 and subsequently filed amendments to the Registration Statement on December 6, 2017, January 31, 2018, February 27, 2018, March 26, 2018 and April 4, 2018. The Registration Statement was declared effective on April 9, 2018.
22. Filer Shareholders have been sent a copy (through delivery by electronic means) of an information statement (the "Information Statement") detailing the terms and conditions of the Spin-Off which forms part of the Registration Statement. All materials relating to the Spin-Off sent by or on behalf of the Filer and nVent in the United States (including the Information Statement) have been sent concurrently to Filer Canadian Shareholders.
23. The Information Statement contains prospectus level disclosure about nVent.
24. Filer Canadian Shareholders who receive nVent Shares pursuant to the Spin-Off will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Spin-Off that are available to Filer Shareholders resident in the United States.
25. Following the completion of the Spin-Off, nVent will send concurrently to nVent Shareholders resident in Canada the same disclosure materials required to be sent under applicable U.S. securities laws to nVent Shareholders resident in the United States.
26. There will be no active trading market for the nVent Shares in Canada following the Spin-Off and none is expected to develop. Consequently, it is expected that any resale of nVent Shares distributed in connection with the Spin-Off will occur through the facilities of the NYSE.
27. The Spin-Off to Filer Canadian Shareholders would be exempt from the prospectus requirements pursuant to subsection 2.31(2) of NI 45-106 but for the fact that nVent is not a reporting issuer under the securities legislation of any jurisdiction of Canada.
28. Neither the Filer nor nVent is in default of any securities legislation in any jurisdiction of Canada.
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 first trade in the nVent Shares distributed in reliance on this decision will be deemed to be a distribution that is subject to section 2.6 of National Instrument 45-102 Resale of Securities.