The Stars Group Inc.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Issuer requires relief from the requirement in Part 8 of National Instrument 51-102 Continuous Disclosure Obligations to file a business acquisition report -- Acquisition is insignificant applying the asset and investment tests -- Applying the profit or loss test produces an anomalous result because the significance of the acquisition under this test is disproportionate to its significance on an objective basis in comparison to the results of the other significance tests and from a practical, commercial and financial perspective -- Issuer has provided additional measures that demonstrate the insignificance of the acquisition to the issuer and that are generally consistent with the results when applying the asset and investment tests.
Applicable Legislative Provisions
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.3, 13.1.
June 6, 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 THE STARS GROUP INC. (the Filer)
DECISION
Background
The securities regulatory authority or regulator in the Jurisdiction (the Decision Maker) has received an application (the Application) from the Filer for a decision (the Exemption Sought) under the securities legislation of the Jurisdiction (the Legislation) for relief from the requirement under Part 8 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) to file a business acquisition report (a BAR) in connection with the Acquisition (as defined below).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator (the Principal Regulator) for the 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 in this decision.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
1. The Filer is a corporation existing under the Business Corporations Act (Ontario). The Filer's head and registered office is located at Royal Bank Plaza, South Tower, Suite No. 3205, 200 Bay Street, Toronto, Ontario, M5J 2J3.
2. The Filer is a reporting issuer (or the equivalent thereof) under the securities legislation of each of the provinces and territories of Canada. The Filer is not in default of securities legislation in any jurisdiction of Canada.
The Acquisition
3. On February 27, 2018, the Filer indirectly acquired a 62% equity interest in CrownBet Holdings Pty Limited (CrownBet) (the First CrownBet Acquisition).
4. On April 23, 2018, the Filer indirectly acquired an additional 18% equity interest in CrownBet (the Second CrownBet Acquisition).
5. The Second CrownBet Acquisition closed concurrently with the acquisition of William Hill Australia Holdings Pty Ltd. (WHA) by CrownBet (the WHA Acquisition).
Application of the Significance Tests
6. Under Part 8 of NI 51-102, the Filer is required to file a BAR for any completed business acquisition that is determined to be significant based on the acquisition satisfying any of the three significance tests set out in section 8.3(2) of NI 51-102.
7. Under section 8.3(12) of NI 51-102, the Filer is required to evaluate the significance of the First CrownBet Acquisition, the Second CrownBet Acquisition and the WHA Acquisition (collectively, the Acquisition) on a combined basis, as they are considered an acquisition of related businesses.
8. The Acquisition is not a significant acquisition under the asset test in section 8.3(2)(a) of NI 51-102 as the Filer's proportionate share of the consolidated assets of CrownBet and WHA at the end of their respective most recently completed financial year represents approximately 3.8% of the Filer's consolidated assets as at December 31, 2017.
9. The Acquisition is not a significant acquisition under the investment test in section 8.3(2)(b) of NI 51-102 as the Filer's completed investments in, and advances to, CrownBet and WHA represent approximately 11.4% of the Filer's consolidated assets as at December 31, 2017.
10. The Acquisition would, however, be a significant acquisition under the profit or loss test in section 8.3(2)(c) of NI 51-102 as the Filer's proportionate share of the consolidated specified profit or loss of CrownBet and WHA for the most recently completed financial year of CrownBet and WHA represents approximately 85.9% of the consolidated specified profit or loss of the Filer for the twelve months ended December 31, 2017.
11. The application of the profit or loss test leads to an anomalous result in that the significance of the Acquisition is exaggerated out of proportion to its significance on an objective basis and in comparison to the results of the asset test and the investment test.
The Signification of the Acquisition from a Practical, Commercial and Financial Perspective
12. The Filer does not believe (nor did it believe at the time that it completed the Acquisition) that the Acquisition is a significant acquisition to it from a practical, commercial and financial perspective.
13. The Filer has provided the principal regulator with additional operating measures that demonstrate the non-significance of the Acquisition to the Filer. These operating measures included the number and dollar value of bets placed by customers of the Filer compared to those of CrownBet and WHA and the number of real-money active unique customers of the Filer compared to those of CrownBet and WHA. The results of those measures are generally consistent with the results of the asset test and the investment test.
14. The Filer is of the view that the asset test, the investment test and these alternative operating measures much more closely reflect the actual significance of the Acquisition to the Filer from a practical, commercial and financial perspective.
Decision
The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted.