Snecma - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- application for relief from registration and prospectus requirements in respect of certain trades made pursuant to an employee share offering by French issuer and a selling shareholder, the French State -- employee share offering involves the use of a collective employee shareholding vehicle, a fonds commun de placement d'enterprise (FCPE) -- employee share offering does not contain a "leveraged fund" component -- relief granted for trades in shares by the selling shareholder to Canadian participants, trades in shares by Canadian participants made to or with the FCPE and trades in units of the FCPE made to or with Canadian participants, subject to resale restrictions -- relief granted to manager of FCPE from advisor and dealer registration requirements.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53 and 74(1)
April 7, 2005
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO AND QUÉBEC
(THE "JURISDICTIONS")
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
SNECMA, SNECMA OUVERTURE, NATEXIS EPARGNE ENTERPRISE
AND THE REPUBLIC OF FRANCE
MRRS DECISION DOCUMENT
Background
The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from Snecma (the "Filer") for a decision under the securities legislation of the Jurisdictions (the "Legislation") for:
1. an exemption from the dealer registration requirements and the prospectus requirements of the Legislation so that such requirements shall not apply to:
(a) trades in ordinary shares ("Shares") of the Filer by the Republic of France (the "Selling Shareholder") to Qualifying Employees (including Former Employees, both as described below) who choose to participate (the "Canadian Participants") in the global employee offering of Shares of the Filer (the "Snecma Employee Share Plan 2005");
(b) trades in the Shares acquired by the Canadian Participants pursuant to the Snecma Employee Share Plan 2005 to a collective employee shareholding vehicle, the Snecma Ouverture, a fonds commun de placement d'entreprise or "FCPE" (the "Fund");
(c) trades in the securities (the "Units") of the Fund made to or with the Canadian Participants;
(d) the redemption of the Units by the Fund; and
2. an exemption from the advisor registration requirements and dealer registration requirements of the Legislation so that such requirements shall not apply to the manager of the Fund, Natexis Epargne Enterprise (the "Manager"), to the extent that its activities in relation to the Snecma Employee Share Plan 2005 require compliance with the adviser registration requirements and dealer registration requirements.
(collectively, the "Requested Relief").
Under the Mutual Reliance Review System for Exemptive Relief Applications
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are otherwise defined in this decision.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation formed under the laws of the Republic of France with a head office in Paris. The Shares of the Filer are listed on Euronext Paris. The Filer is not and has no current intention of becoming a reporting issuer (or equivalent) under the Legislation.
2. Messier-Dowty Inc., Turboméca Canada Inc., Techspace Aero Canada Ltée and other Canadian affiliates of the Filer (the "Canadian Affiliates", and together with the Filer and other affiliates of the Filer, the "Snecma Group") are direct or indirect controlled subsidiaries of the Filer and are not and have no current intention of becoming reporting issuers (or equivalent) under the Legislation.
3. The Filer and Sagem S.A. ("Sagem") are participating in a transaction under which Sagem has made a public tender offer for the outstanding Shares of the Filer (the "Sagem Tender Offer"). The Sagem shares are listed on Euronext Paris.
4. The Selling Shareholder is the Republic of France. The Selling Shareholder owns or controls, directly or indirectly, 22 374 198 Shares, representing approximately 8.2% of the issued and outstanding Shares. Prior to tendering some if its holdings of Shares to Sagem under the Sagem Tender Offer, the Selling Shareholder beneficially owned or controlled, directly or indirectly, approximately 62.2% of the issued and outstanding Shares. Under French privatization law, the tender of Shares by the Selling Shareholder is considered a disposal which obliges the Selling Shareholder to make an offering of Shares to Qualifying Employees (as defined below) under the Snecma Employee Share Plan 2005. The Selling Shareholder is not and has no current intention of becoming a reporting issuer (or equivalent) under the Legislation.
5. Current employees of the Snecma Group and former employees of the Snecma Group (the "Former Employees" and together with the current employees of the Snecma Group, the "Qualifying Employees") are invited to participate in the Snecma Employee Share Plan 2005 implemented in accordance with a French ministerial order enacted under French privatization law (the "Ministerial Order").
6. The Fund is a FCPE established by the Manager to facilitate the participation of Qualifying Employees in the Snecma Employee Share Plan 2005 and to simplify custodial arrangements for such participation. The Fund has been established for the sole purpose of providing Qualifying Employees with an opportunity to indirectly acquire an interest in the Shares. The Fund is not and has no current intention of becoming a reporting issuer (or equivalent) under the Legislation. The Fund is a collective shareholding vehicle of a type commonly used in France for the conservation of shares held by employee investors and is registered and approved by the French Autorité des marchés financiers (the "French AMF"). Only Qualifying Employees are allowed to hold Units of the Fund, and such holdings will be in an amount reflecting the number of Shares held by the Fund on behalf of such Qualifying Employees.
7. The Manager is an asset management company governed by the laws of the Republic of France. The Manager is registered with the French AMF to manage French investment funds and complies with the rules of the French AMF. The Manager is not and has no current intention of becoming a reporting issuer (or equivalent) under the Legislation.
8. Qualifying Employees will be invited to participate in the Snecma Employee Share Plan 2005 under the following terms:
(a) The purchase price for the Shares is calculated as (i) the closing price of the Sagem shares on the date of their delivery to the Selling Shareholder pursuant to the Sagem Tender Offer, (ii) divided by the Sagem/Snecma exchange ratio applied in the Sagem Tender Offer, (iii) less a 20% discount.
(b) Payment for the Shares may be made upon delivery or in instalments.
(c) The Shares cannot be sold for a period of two years (the "Hold Period") from the date of purchase.
(d) At the end of the Hold Period, a Canadian Participant may (i) redeem Units with the Fund in exchange for a cash payment based on the then market value of the Shares (or the equivalent shares of the continuing company resulting from the merger) represented by the Units; or (ii) continue to hold the Units and redeem them at a later date.
(e) A purchaser who retains his or her purchased Units for three years will receive bonus shares ("Bonus Shares"). It is anticipated that at the end of the three-year ownership period, an eligible subscriber will receive one Bonus Share for each 4 Shares that he or she purchased, up to a limit on the value of all Bonus Shares received. Canadian Participants will receive one Unit for each Bonus Share contributed to the Fund.
9. The Shares subscribed for by the Canadian Participants under the Snecma Employee Share Plan 2005 will be contributed to the Fund and the Canadian Participant will receive one Unit for each contributed Share. Canadian Participants will also receive one Unit for each Bonus Share contributed to the Fund on their behalf.
10. Dividends paid on the Shares (or the equivalent shares of the continuing company resulting from the merger) held in the Fund pursuant to the Snecma Employee Share Plan 2005 will be contributed to the Fund and used to purchase additional Shares (or the equivalent shares of the continuing company resulting from the merger). The Canadian Participants will receive additional Units representing such contribution.
11. For Canadian federal income tax purposes, the Canadian Participants will be deemed to receive any dividends paid on the Shares (or the equivalent shares of the continuing company resulting from the merger) held by the Fund on their behalf, at the time such dividends are received by the Fund. This will be the case notwithstanding the reinvestment of such dividend amounts by the Fund to acquire additional Shares (or the equivalent shares of the continuing company resulting from the merger) on behalf of the Canadian Participants. Consequently, the Canadian Participants will be required to fund the tax liabilities associated with the dividends without immediate recourse to the actual dividends.
12. In the event of an over-subscription of the Shares available under Snecma Employee Share Plan 2005, the French Minister of the Economy, Finance and Industry may reduce the number of Shares that should be allocated to each subscriber in approximate proportion to the amount of his or her initial subscription.
13. The Fund is established for the purpose of implementing the Snecma Employee Share Plan 2005. To facilitate the management of Shares purchased under the Snecma Employee Share Plan 2005, as well as the arrangements for granting Bonus Shares and treatment of revenues thereon, two separate compartments in the Fund will be used in 2005: one in respect of Shares purchased under the Snecma Employee Share Plan 2005, and one in respect of fractions of Bonus Shares and revenues (such as dividends paid on Shares, Bonus Shares and fractions of Bonus Shares (the "Revenue Compartment"). The Fund's portfolio will consist exclusively of Shares (or the equivalent shares of the continuing company resulting from the merger) and, from time to time, cash in respect of dividends paid on the shares held in the Fund and cash or cash equivalents which the Fund may hold for purposes of facilitating Unit redemptions. The Fund will not engage in any of the investment practices described in sections 2.3 through 2.6 of National Instrument 81-102 Mutual Funds except as described herein.
14. Except as described herein, shares purchased under the Snecma Employee Share Plan 2005 will be deposited in the Fund through Natexis Banques Populaires (the "Custodian"), a French bank subject to French banking legislation. Under French law, the Custodian must be selected by the Manager from among a limited number of companies identified on a list by the French Minister of the Economy, Finance and Industry and its appointment must be approved by the French AMF. The Custodian carries out orders to purchase, trade and sell securities in the portfolio and takes all necessary action to allow the Fund to exercise the rights relating to the securities held in its portfolio.
15. The Manager's asset management activities in connection with the Snecma Employee Share Plan 2005 and the Fund is limited to receiving the Shares from the Custodian on behalf of the Canadian Participants, and selling such Shares (or the equivalent shares of the continuing company resulting from the merger) as necessary in order to fund redemption requests. The Manager is also responsible for preparing accounting documents and publishing periodic informational documents as provided by the rules of the Fund. The Manager's activities in no way affect the underlying value of the shares held in the Fund, and the Manager will not be involved in providing advice to any Canadian Participants.
16. The initial value of a Unit in the Fund corresponds to the purchase price for the Shares when the Shares are transferred to the Fund. The Unit value of the Fund will be calculated on a daily basis and reported to the French AMF, based on the net assets of the Fund divided by the number of Units outstanding. The number of Units will be adjusted on the basis of the market price of the Shares and other assets (ie. cash) held by the Fund, effective from the first date on which the net asset value is calculated and whenever Shares (ie. Bonus Shares) or other assets are contributed to the Fund. The net asset value of a Unit in the compartment dedicated to the Shares subscribed for under the Snecma Employee Share Plan 2005 will remain equal to that of a Share.
17. Upon redemption of the Units, the Canadian Participant will be paid in cash on the basis of the net market price of the Shares (or the equivalent shares of the continuing company resulting from the merger) corresponding to the Canadian Participant's Units and will pay the redemption charges in connection with such redemption (except that the Revenue Compartment of the Fund will bear the cost of brokerage fees and commissions incurred in connection with trades effected on shares held therein).
18. There are approximately 969 Qualifying Employees resident in Canada, including approximately 660 current employees in Ontario, 275 current employees in Quebec and 34 Former Employees across Canada, all of whom together account for less than 2% of the Qualifying Employees worldwide.
19. The Canadian resident Qualifying Employees will not be induced to participate in the Snecma Employee Share Plan 2005 by expectation of employment or continued employment.
20. The total amount invested by a Qualifying Employee cannot exceed €150,900 (an official exchange rate will be fixed on the day before the opening of the subscription period), subject to the availability of Shares.
21. None of the Filer, the Selling Shareholder, the Manager or any of their employees, agents or representatives will provide investment advice to the Canadian Participants with respect to an investment in the Shares or the Units.
22. The Canadian Participants will receive an information package in the French or English language, as applicable, which will include a summary of the terms of the Snecma Employee Share Plan 2005 and a description of the relevant Canadian income tax consequences. Upon request, Canadian Participants may receive copies of the French Document de Référence and Note d'opération filed with the French AMF in respect of the Shares and a copy of the Fund's rules (which are analogous to company by-laws).
23. It is not expected that there will be any market for the Shares (or the equivalent shares of the continuing company resulting from the merger) or the Units in Canada. The Units will not be listed on any exchange.
Decision
Each of the Decision Makers 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 Makers under the Legislation is that the Requested Relief is granted provided that the first trade (alienation) in any Units or Shares (or the equivalent shares of the continuing company resulting from the merger) acquired by Canadian Participants pursuant to this Decision shall be deemed a distribution or a primary distribution to the public under the Legislation of such Jurisdiction.